The following is an excerpt from Amey Stone | December 14, 2015 | Barrons.com |
Bond markets have been extra rocky the past week with junk bonds falling fast and Treasuries volatile. Stocks have been no picnic either.
With the Federal Reserve’s Open Market Committee convening Tuesday and Wednesday this week — and widely expected to rates for the first time in nine years at the conclusion of their meeting — you might think that’s why markets are volatile.
And it is part of it. But a bigger trigger for the recent rockiness is the falling price of oil, writes Russ Koesterich, BlackRock’s global chief investment strategist, in a Monday commentary.
That’s in good part because the market had priced in the first rate hike. But the latest slide in crude – continuing Monday — was unexpected. He writes:
Investors seem prepared for the Federal Reserve to raise interest rates for the first time in nine years later this week. As such, the negative market sentiment is not being driven by the Fed, but by the collapse in oil prices. Paying less at the pump might seem like a good thing, but the drop in crude has reinforced fears over slow economic growth and deflation, placing pressure on a range of asset classes related to energy.
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