One and Done

That's what the Fed would want us to believe with their increase of the discount rate. Even though this would be the first time in history where they have raised rates one time and stopped. The Fed made this announcement after market hours, an interesting time to make this announcement and the futures headed south. The market got some help from benign CPI numbers, and investors seem to accept the explanation that the rate hike was just a small inconsequential event. We suspect that there will be a CPI revision to the upside and the Fed is aware of this and trying to get ahead of the curve. Never mind the fact that the last 30 yr bond auction was weak, and maybe the US bond buyers want to earn more on their investment capital. The Fed has to be aware of this and wants to have a more solid auction next time, or a better bid to cover. Anyway, all was well by mid morning Friday with the S&P shaking off the losses and booking a sixth day of gains. Volume and activity Thursday was sluggish and Friday really pathetic for most of the day. Not a very convincing move to us.

Real estate and business still looks soft to us, inflation is still not a big issue, but the Fed has said that they will have to reduce their balance sheet expansion in the future. We sure hope that we will not see higher rates with less growth. Let's cross our fingers that we have more solid earnings due to sales increases . .