Could the Fed deliver a perfect rate hike instead of a perfect storm ? In spite of hugely divided communities of investors and economists, does everybody agree on what would be the best scenario for risky assets? The table below summarizes what is at stake:
My favorite scenario is a combination of a hike and a dovish stance. In that sense I clearly subscribe to what Athanasios Orphanides wrote a few weeks ago: "when monetary policy is appropriately conducted, liftoff does not mark the end of the expansion phase of the business cycle".
To sum up: this "map" shows how risky assets could react to the next FOMC according to different scenarios: target range + economic forecast + dots.
I clearly bet on a hike coupled with a dovish stance. It would probably be the most favorable outcome for risky assets.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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