The Federal Reserve surprised the markets last Friday, not by the move to increase the rate at which it charges banks to borrow funds, an increase from 0.50% to 0.75% but by the timing, most were expecting this to take place further down the road. However the first move had to come sometime and now seems as good a time as any, the markets are on a much firmer footing, there is growth and most predict growth to accelerate into the third and fourth quarters 2010- yes Greece has put up a minor speed bump but it will be sorted (first major test for the EU and they will want to be seen to be doing the right thing). The Inflation data out of the US on Friday was better than expected. So far from panicking investors should view this move - the first of many - as a positive in so far as the move wouldn't have been made if the Economy couldn't withstand it. There will be other such moves not just to interest rates - after all this will not really affect the average man in the street at all - but the Fed also has to reduce its balance sheet from the 2.1 Trillion dollars it has expanded to over the past 12-18 months - yes that is a lot of zero's.
So embrace the news its only just staring but all that is good for equities as it should mean we are back on the road to a more normal market place, and if that is the case at the prices equities are cheap!
- Last updated on .