A potential Greek bankruptcy has dominated the headlines over the past couple of weeks and this Sunday is a crucial referendum to decide their fate. The Greek PM Alexis Tsipras today urged its citizens to reject an international bailout deal. Many economists and investors are now expecting a bankruptcy in the near term. The big question for investors is: what does a Greek bankruptcy mean to my investment portfolio?
The International Monetary Fund urged the Federal Reserve to wait until the first half of 2016 to start raising short-term interest rates because the U.S. economy remains subpar. This is an unprecedented event as I can't recall a time that the IMF has ever tried to influence Federal Reserve policy. The IMF predicted the economy will grow 2.4% this year, down from its April forecast of 3.1% and the second time it cut growth targets this year.
The financial markets are guided by supply and demand conditions for stocks and bonds. Historically, their fluctuations have been heavily influenced by business conditions and economic cycles. During the past 12-15 months something new and different has dominated the marketplace. Unorthodox governmental forces are the engine that drives the financial markets which seem totally insensitive to any negative economic developments.
"I want the easy
I want the good times
Oh, I never had
I want the easy
I want the good life
I want it bad" -- Billy Joel
Yesterday, the Federal Reserve removed its "patient" language, as expected, but Fed Chair Janet Yellen delivered her best quote yet:
Just because we removed the word 'patient' from the statement, doesn't mean we're going to be impatient.
With many investors still expecting a first rate increase in 2015 (perhaps in September), you shouldn't count on it. Why? It's actually quite simple. Yellen repeatedly tells the market that the Fed's decision is data dependent on whether it will raise rates or not. So if you look at the data, there is nothing in the data telling us that a rate increase will come in 2015 at all. Let's look at the numbers.
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