Last Week Recap – Two sides

Investors are still waiting to see when the Fed plans to increase the interest rates. The last rate increase happened in 2006 and the rates have been at the bottom since 2008. The Fed has been maintaining their outlook to raise interest rates during the summer of 2015 after they have reached an inflation goal of 2%.

Job growth in the US has been good and the economy as a whole has been improving. However, oil has since taken a bath even though it is seeing a slight rebound thanks to rigs being shutdown. The dollar has also been strong due to the improving economy. Both of these factors is going to put downward pressure on inflation. We’ve been active in stating that inflation will not meet its 2% target by summer, and that we expect a raise in interest rates to happen more towards the end of 2015. It looks like the Fed is now on the same track as they stated similar wording in their minutes. The one thing they don’t want to do is raise the rates too early and dampen the improving economy.

The next bit of news happened across the pond on Friday. After a dismal several meetings Greece has finally reached a deal with the other European Nations. This came as a bit of a shock since there was no progress happening at any of the other meetings. Greece is going to get a slight extension, four months, and will have to obey several strict guidelines. One guideline is they have to submit a budget by Mondayand have it approved. We don’t expect this to be a problem for Greece so they should get their needed time. Now we will have to wait and see what happens in four months.

The whole week was flat except for Friday when the market broke resistance and pushed to new highs. The days before the breakout the market was flagging at the 2100 level. The flag helped the market recover and begin to work off the overbought conditions however we are still very overbought. We may be able to get a couple more days of gains but this market needs to rest before moving any higher.