Hedge fund manager Daniel Loeb says that anticipating a rate hike from the Fed is like “Waiting for Godot” referring to Samuel Beckett’s play where two friends wait for a friend to show up and he never does.
For a while now, the chatter in the investing world has been about when the first rate hike will happen.
After years of waiting, economists now expect the Fed will begin hiking in the middle of 2015.
But until that happens, we wait.
“We believe we are entering a decisive period and normalized Third Quarter economic growth will mark a key inflection point,” Loeb writes in his fund’s second quarter investor letter. “Until then, anticipating a rate hike has been like waiting for Godot. If growth is approximately 3% during the second half of this year, we expect the market will look to the Fed to take action in early 2015. If growth moves closer to 2%, the Fed is likely to remain on hold for longer. While typically markets have applauded that course of action, at current S&P multiples, lower growth could instead cause a modest de-rating as corporate earnings growth will likely disappoint.”
So far this year, Third Point is up 6% year-to-date, while the S&P is up 7.1%.