"The End of the World is Nigh" .... or perhaps not .

Thursday 17th September 2015

 

"The End of the World is Nigh" .... or perhaps not .

 All outlets, everywhere.

Just time for one very brief and final contemplation  ..... Fed Chairwoman Janet Yellen is due to announce the Fed's decision on whether to lift rates at 17.00 BST, with a press conference to follow at 17.30 BST. According to some, Armageddon is due to strike a few minutes later should the Fed have opted for a hike.

Yes, we know the arguments why one might expect an extreme reaction, not least that extreme reactions have become something of the norm these days, given the lack of liquidity and shock absorbers in markets. And it's also true that those NOT expecting a hike are just about in the majority so the move would be something of a shock. And however clever the wording of the Fed statement is, it's possible that to raise rates when there are frankly no current inflation pressures might be taken as revealing a desire for a more aggressive tightening cycle.

But would it be so incredibly naïve to hope that since a 25bp rise has been signposted for so long, whether now or a little later, the markets may to some degree at least be prepared ? No doubt there would be a sharp knee-jerk reaction, and that illiquidity and stop-loss selling would hugely exaggerate moves. But will the markets take into account recent similar examples (think "taper tantrum" etc) when vicious market falls were swiftly followed by almost equally vicious recoveries ? After all, some of the emerging market nations thought most at risk from a US rate hike have themselves called for exactly that in the belief that it would be preferable to the continuing uncertainty.

The odds suggest it won't happen, and if it does .....  recent history and market conditions point to the almighty turmoil that those arguing against a rise have been warning against. Would you gamble against it ? Well, you know what they say about standing in front of runaway trains. But whilst it might be optimistic to hope for a less extreme outcome and that it might be short-lived, it's not impossible.

We'll find out this evening, and reassess tomorrow .... if the world's still here.