With all of the recent volatility in stocks, the question on the markets’ mind this week is, “Will the Federal Reserve (Fed) increase interest rates by 25 basis points (bps)?” Most market participants think the Fed will raise rates, but it is unclear what guidance will be offered regarding Fed policy in 2019. Last week was difficult for U.S. equities as major markets slumped due to trade tensions and uncertainty about how the turnover in the Trump administration will impact policy.
I do expect the Fed to increase rates, but think it will indicate a more muted view of rate hikes in 2019. This should provide some support for risk markets. My expectation is stocks and bonds will trade in a choppy sideways pattern for the remainder of the year.
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