The U.S. Fed rate hike of 25 basis points on Wednesday June 14th could be nasty implications on markets. If anything we see this as a potential driver for the summer volatility we expected which was suggested by our Market Barometer.
After the interest rate hike investors are closely watching what happens in 4 key markets:
- 10-year and 20-year Yields
- stock markets in the U.S.
- U.S. dollar
The key point here is that one market will start trending, and that will influence the other markets to a certain extent. The success factor is to identify this dynamic. That is the basis to play the most profitable trend.
The initial reaction of Yields, as seen on the chart, was a strong retracement. That is odd because the reaction of bonds was muted, gold came down as well, and stocks slightly. These markets simply cannot move in the same direction, most of them are negatively correlated markets.
So it will be extremely interesting to wacht the developments in the coming days, in particular in Gold as the gold market arrived at a decision point.
Investors should not necessarily get nervous but rather stay very focused and sharp now. This is decision time in several markets, so being alert and acting fast once new trends become visible is what investors have to do now.