Consensus interest rate hike and economic expectations below, courtesy of the yield curve.
The market is expecting the Fed to raise the funds rate by about 1 percentage point over the next year, and another percentage point over the subsequent year. To me, this confirms what I pointed out in my previous post, namely that the market is not expecting great things from the economy over the next few years.
AKA, investors’ economic expectations are still pretty low despite the extended upward sweep of optimism since mid-2009. Most expect the U.S. economy to remain pretty ugly this year, thus there’s still a high ‘wall of worry’ for markets to climb, which of course they’ll only do if worries prove unfounded.
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