The Fed and the increased likelihood of a March interest-rate hike

We’ve changed our projections for the next rate hike from the U.S. Federal Reserve (the Fed). When do we think the next one is coming?

This week, Rob Cittadini, regional director, consultant relations, joined Director of Client Investment Strategies, Mark Eibel to talk about the ongoing rally for U.S. equities and the likelihood of a Fed rate hike in mid-March.

Is the U.S. equities market "priced for perfection"?

At the beginning of the episode, Eibel spoke on the continuing rally for U.S. equities. Eibel noted that the Dow Jones Industrial Average U.S. equity index crossed 21,000 earlier this week, after a speech by U.S. president Donald Trump. Eibel called the speech “presidential” and “short on details” and noted that the market loved it. However, Eibel stated that Russell Investments strategists believe the U.S. equity market is “priced for perfection,” meaning that the relatively high prices are based on an ideal execution of the proposed policies laid out by the Trump administration. Despite the ongoing rally, our strategists continue to believe that there may be better opportunities for equity investors outside the U.S.

March 15 and the Fed

Cittadini noted that comments from the U.S. Federal Reserve board this week seemed to indicate a possible interest rate hike in mid-March. Eibel mentioned that our own investment strategist Paul Eitelman has raised the probability to two-thirds or higher that the Fed will hike rates at their meetings on March 14 and 15. This is a change from our previous projection of a rate hike in May or June. What hasn’t changed is our forecast for the number of 2017 rate hikes: We still project two for the calendar year.

Another strong week in Europe

Looking across the globe, Eibel noted that emerging markets have had a strong year so far and that economic and market data coming out of Europe still indicate opportunities there. Russell Investments strategists continue to believe that this data supports trimming some U.S. exposure and shifting exposures toward Europe.

Watch the video now.