John OMalley

FIN 340 401

11/17/2015

Wall Street Journal Personal Notebook

Week One (9/14-9/20)
DJIA: +0.08%

NASDAQ: +0.44%

STOXX 600: +0.32%

Weekly Write-Up:
Perhaps the most significant event that took place this week was the Federal Open Market
Committees Decision to hold interest rates near zero. While this decision was not entirely
surprising, it did negatively impact the economy, as U.S. stock prices suffered heavy losses. The
Fed cited concern over growth among the global economy as the primary factor in holding the
interest rates. While the Fed may not have elected to raise rates at this meeting, they left the door
open to do so before years end so it will be interesting to see whether or not a rate hike comes to
fruition in the near future and what affect that has on stock prices and the global economy.
Presently, the Feds decision to not raise rates has spurred a sell-off that has led to declines in the
Dow Jones, S & P 500, and the NASDAQ alike.
What I believe will be the most intriguing thing to watch develop over the coming
months is how the Chinese economy progresses and whether or not investors fears over growth
will prove to be unwarranted. If the Chinese economy has a positive outlook, it may largely
factor in to a potential Fed decision to raise rates before years end. This would indicate a
positive outlook for the global economy and would probably lead to a surge in stock prices and
other markets. If it has a negative outlook, the Fed may elect to hold of raising rates, which could
lead to a market decline. While there are other factors that will impact the Feds decision, such as
inflation, economic growth, and the job market outlook, I personally believe China will be the
wildcard that could sway the Fed one way or the other.
Stocks Fall Sharply as Federal Reserve Decision Sparks Growth Concern
(09/18/2015)
This article discusses how U.S. stock prices suffered their biggest single-day losses in
two weeks this past Friday. This sell-off has been mainly driven by the Federal Open Market
Committees announcement that it would leave short-term interest rates near zero, causing
investors to become concerned about global growth.
For many investors, this is the Federal Reserves way of signaling the economy may be
vulnerable, due largely in part to slowing growth in China and other emerging markets. As a
result, several banks and asset managers have sold off assets sharply, which helped bring the
Down Jones down 1.7%. The S & P 500 also well 1.6% and the Nasdaq Index declined 1.4%.
Among the Dows biggest decliners were Goldman Sachs and J.P. Morgan. Declining prices of

shares in energy companies also contributed to the decline, as concerns over economic growth
triggered a drop in the price of crude oil.
The authors go on to discuss that while low interest rates have helped fuels years of rising
stock prices, many investors are feeling now feeling pessimistic because a rates increased
wouldve signaled optimism about economic growth. Instead, holding off on raising rates implies
that growth has not been as strong as many had expected.
Personally, I was not surprised that Fed decided not to raise rates, because we had
discussed the likelihood of this move in class and the general consensus was that the Fed would
hold rates. While a negative impact on the stock market was not entirely unexpected, it will be
interesting to see how the market fluctuates in the coming days. At the same time, what will be
really interesting to observe over the coming months is the Chinese economy. If Chinas
economy takes a hit and growth continues to decline, it will continue to negatively impact
emerging markets, the U.S. economy and the overall global marketplace. It will also be
interesting to see if the Fed does in fact decide to raise rates at some point this year and what
effect that will have on stock prices in the U.S. and global economies.
Economists React to the Federal Reserves Decision: Relief
(0917/2015)
I found this article to especially intriguing because it quotes a number of different
economists and offers their opinion on the Federal Reserves decision to hold interest rates near
zero. The underlying theme of their comments centered around the Feds hesitance to raise rates
based on the global economic outlook. One economist discussed the Feds third mandate of
global economic stability. I found this to be particularly interesting because, while we know
the Feds mandates are full employment and stable inflation rate, this addresses the unwritten
third mandate of global economic stability, which I believe perfectly illustrates how the United
States has become the driving force of the global economy.

Week Two (9/21-9/27)

DJIA: -1.18%

NASDAQ: -2.95%

STOXX 600: -2.39%

Fed Decision to Hold Steady was a Close Call

September 22, 2015
Federal Reserve officials who have spoken since the Fed elected not to raise interest rates
at its last session and stated that their decision to hold rates near zero was a close call. This
decision was based largely on financial market turbulence and uncertainty over Chinese
economic stability. While it may have been a close call, interestingly enough, the Fed still voted
9-1 in favor of holding the interest rate.
While this past meeting may not have been the appropriate time to raise rates, there is
still a general consensus among Fed officials that a rate hike would be appropriate before years

end. As more information becomes available and the outlook of the global economy becomes
clearer, it will be interesting to see what the Fed elects to do and whether these predictions of a
rate increase will turn out to be true.
Janet Yellen Expects Interest Rate Increase This Year
September 24, 2015
While presenting a 40-page speech to an audience at the University of Massachusetts in
Amherst, Federal Reserve Chairwoman Janet Yellen argued the case for raising interest rates
later this year, sending a warning to skiddish financial markets that the Feds recent decision not
to raise rates was only temporary. The central point of her argument was that slack in the
economy had diminished to a point where inflation pressures will start to build in the coming
years, and that these pressures had yet to assert themselves due to a strong dollar and falling
oil/import prices placing temporary downward pressure on consumer prices. These headwinds
will diminish over time, she argued, and the Fed needs to get ahead of them in order to prevent
risky-investing that could potentially drive the economy into a tailspin.
Ms. Yellen would go on to say that she expects inflation rates to return to near the Feds
mandate of 2% sometime in the near future. She also discussed the risk of waiting too long to
raise rates, which would force the Fed to make an abrupt change in interest rates to prevent the
economy from overheating. Instead, Ms. Yellen argued that the Fed should get ahead of this by
raising rates sometime before years end, and gradual tightening the pace of the rates as time
goes on. As a result of Ms. Yellens statements, the stock market made significant gains, while
investors began to sell off bonds.
Week Three (9/28-10/4)
DJIA: +2.94%

NASDAQ: +3.61%

STOXX 600: +1.84%

Week Four (10/5-10/11)

DJIA: +1.84%

NASDAQ: +1.03%

STOXX 600: +1.25%

OIL: +$3.37 (7.28%)

The U.S. and eleven other nations agreed to a historic Pacific trade deal, a victory for the
Obama administration, although the deal will probably have a tough time getting passed by
Congress. Hillary Clinton, would later state that she opposed the Pacific Trade deal, undercutting
Obama. In other legislative/diplomatic news, the House of Representatives voted to lift the ban
on oil exports, but it remains to be seen if the bill will be passed by the Senate.
The U.S. Treasury sold a 3-month bill with a yield of zero for the first time ever,
reflecting their highest level of demand since June.
During the International Monetary Fund meeting, the IMF downgraded its outlook for
growth and warned of a rising risk of global recession. At this meeting, many central bankers
stated they want the Fed to raise rates, saying that reducing uncertainty would help emerging

markets. At the same time, Central Banks are selling U.S. government debt at the fastest pace on
record, another sign of potential market slowdown.
Minutes from the September Fed meeting were released, showing that the Fed believes it
is near its goal of full employment, but held off raising rates due to concerns over sluggish
inflation.
Six weeks after the Chinese stock market hit a floor, stocks have remained near their lows
and their volume has plunged, further adding to the economic distress taking place in China.
Yield of 0% a First at 3-Month T-Bill Sale
October 6, 2015
The U.S. Treasury sold a new government security with a three-month maturity and a
yield of zero for the first time on record, as demand for Treasury Bills soared to its highest since
June. This is especially intriguing because buyers essentially gave the U.S. government a free
short-term loan in exchange for a highly liquid debt instrument for their portfolio.
This increased market movement toward Treasury Bills reflects diminishing expectations
across financial markets that the Fed will raise rates before years end. Mondays $21 billion
auction of three-month Treasury Bills drew $4.14 in bids for each dollar spend, the highest bidto-cover ratio since June 22.
However, the Federal Reserve is not the only factor driving demand for Treasury Bills.
The Treasury has been cutting the size of bill sales over the past few months in attempt to avoid
hitting the governments debt ceiling. New regulations designed to strengthen the health of the
money-market fund industry have also boosted demand for the bills. As a result, competition to
obtain Treasury Bills has intensified recently, with five of the last six one-month bill auctions
being offered at yields of zero. It will be interesting to see whether or not the debt ceiling with be
raised and whether or not that will continue to drive Treasury Bill sales in the immediate future.
Historic Trade Pact Sealed
October 6, 2015
The Trans-Pacific Partnership, the largest trade deal in a generation, has been completed,
marking a victory for the Obama administration. While some industries such as agriculture,
aerospace, and apparel have applauded the new deal, other industries like pharmaceutical and
tobacco companies have been quick to criticize the deal, stating that they fact falls short in
several key areas. The pact is between 12 counties, including the U.S., Japan, Australia, and
Vietnam, and lowers trade barriers for several different goods and services.
However, the President still faces great opposition from the Republican-led Congress,
which has been critical of the deal and appears unlikely to pass it. Even pro-trade Republican
members such as Paul Ryan (R-WI) and Orrin Hatch (R-UT) have expressed concerns about the
bill. While they may not be able to agree on much, both Bernie Sanders and Donald Trump also

criticized the bill. The biggest supporters of the deal are companies such as Cargill, Nike, and
Boeing, who all stand to benefit from it. On the other hand, several companies such as Ford
Motor co. have spoken out against the bill, claiming it will negatively impact them. It will be
interesting to see if President Obama is able to gain the support needed from Congress to pass
this deal, which could prove to be one of the highlights of his tenure as President if passed.
Week Five (10/12-10/18)
DJIA: +0.49%

NASDAQ: +0.99%

STOXX 600: +0.37%

OIL: +$0.16 (0.34%)

Weekly Write-Up:
Credit-rating firms such as Moodys and the S & P 500 are downgrading more U.S.
companies than any other time since the Financial Crisis. In August and September, Moodys
downgraded a total of 108 companies. The S & P 500 has already downgraded 297 companies
through the first 9 months of the year. These downgrades have been driven largely by falling
profits and increased borrowing and have rattled debt markets led to increased economic
concern.
Top Fed Officials expressed doubts about potential rate increases for 2015. In an
interview with CNBC, Gov. Dan Tarullo stated that it would be inappropriate to raise rates at this
time, due to the fact that the U.S. doesnt have much momentum in a globally disinflationary
environment. Gov. Lael Brainard echoed these sentiments, saying that she too does not expect a
rates increase this year, citing concerns over inflation as her reasoning.
Statistics from the Labor Department further backed up these beliefs, as lackluster
readings on consumer spending, inflation, and jobs virtually eliminated the chances of a move
this month. The Labor Department also announced that consumer prices had fallen for the second
straight month, as the Consumer Price Index fell 0.2%, largely because of low gas prices. This
decline was largely driven by a fall in industrial production, as the Fed announced that industrial
production had also fallen 0.2% due to a strong dollar and weak overseas economies.
The most notable of these weak overseas economies is China, as it came to light that
Chinas growth further sputtered in the 3rd quarter, falling to 6.9%- its lowest since the financial
crisis.
Cracks Emerge in Bond Market
October 13, 2015
Credit rating firms are now downgrading more U.S. companies than at any point in time
since the financial crisis. Falling profits and increased borrowing have driven this and signal that
the six-year-long economic recovery could be under threat, as analysts expect profits to decline
at large companies for the second straight quarter for the first time since 2009.
After years of record debt issuance, low corporate defaults, and persistently low interest
rates, the fear has become that these companies will have trouble repaying their debts. An

increase in the U.S. corporate default rate has further exacerbated these fears, as the default rate
among lower-rated U.S. corporate bonds has increased to 2.5%, up 1.4% from last July. In the
past two months, Moodys has issued 108 credit-rating downgrades compared to just 40
upgrades. At the same time, S & P 500 has downgraded 297 companies compared to just 172
upgrades.
These developments signal several cracks in the bond market, as worries over
companies financial health has widened to spread between U.S. corporate bonds and Treasury
Bills to its highest gap in more than three years. The spread recently hit 1.71 percentage points,
up 0.91 from July of 2014, which some analysts warn has foreshadowed negative implications in
the past. It will be interesting to see if the gap continues to widen and if these market
developments actually are a signal of negative things to come in the near future.
Atop Fed, Doubt on Rate Timing Arises
October 14, 2015
Doubts about whether the Federal Reserve will be able to raise rates by years end have
risen among high-ranking officials at the Fed. In an interview with CNBC, Gov. Dan Tarullo
stated that it would be inappropriate to raise rates at this time, citing the fact that the U.S. doesnt
have much momentum in a globally disinflationary environment. Gov. Lael Brainard made
similar statements a few days before, saying that she too does not expect a rates increase this
year, and citing concerns over sluggish inflation levels as her reasoning as well.
Inflation has run below the Feds mandate of 2% for more than 3 years and the Fed has
been reluctant to raise rates until it is confident inflation will move back up to its target. Both
governors also expressed doubts about an idea that Fed Charwoman Janet Yellen had put out at a
speech in Amherst, Mass. Earlier this month that slack in the economy is diminishing
unemployment falls, a precursor to higher inflation and higher rates. While 13 of the 17 Fed
officials previously stated that they believed a rate increase would take place before years end,
growing divide among top officials has created uncertainty and clouded the outlook for this. It
will be interesting to see how this plays between now and years end and whether or not the Fed
officials will be able to reach a consensus.
Week Six (10/19-10/25)
DJIA: +2.42%

NASDAQ: +2.58%

STOXX 600: +3.60%

OIL: -$1.29 (2.81%)

Weekly Write-Up:
Fidelity Investments announced it is converting its $115 billion Cash Reserves fund to
U.S. government debt, in an attempt to get ahead of new rules that will go into effect next
October that would safeguard the money-fund industry in the event of a financial crisis. Several
other firms are following suit, which driven some Treasury Bill yields to zero.

While the Euro may have declined, U.S. and European stock prices saw great increases
based on the prospect of new European Union stimulus measures. This increase was driven by
comments made by European Central Bank chief Mario Draghi that indicated the ECB is
prepared to do more to boost inflation and growth. The ECB will purchase bonds and start
charging banks more to hold their surplus funds, which would stimulate the private sector,
spending and investments, and expand efforts to stimulate the sluggish economy.
In China, the Peoples Bank of China combined a quarter point cut in the benchmark
interest rates with a half-percentage reduction in banks reserve requirement ratios in an attempt
to lower corporate finance costs and pump money into the economy.
Back in the U.S., investors continued to speculate a Fed rate increase will not happen this
year. This is due to a number of factors including; Japan reporting a sharp decline in export
growth, China posting its lowest GDP growth since the financial crisis, and European forecasters
cutting their projections for European inflation. This speculation should at least initially fuel
purchases of riskier assets, such as stocks, corporate bonds, and commodities.
Funds Clamor for Short Treasurys
October 20, 2015
Fidelity Investments has announced that it plans on converting its $115 billion Cash
Reserves fund to U.S. government debt by December 1. Fidelity has the worlds largest money
fund, and plans to convert it entirely into U.S. Treasury Bills as a way of circumventing new
rules that will go into place in October of next year that are intended to safeguard the moneyfund industry in the event of another financial crisis. Several other firms are following Fidelitys
lead, pushing some Treasury Bills yields to near zero and into negative territory. It is estimated
that as much as $1 trillion of money-market fund assets could be caught up in conversions to
Treasury Bills.
This movement towards buying Treasury Bills has also led to increased prices of the next
closest security, debt backed by Fannie Mae and Freddie Mac. The Treasury Department has
stated it wanted to issue more Treasury Bills to keep up with demand, but the latest standoff in
Congress has prevented that from happening. While this increase in demand for Treasury Bills
has allowed the U.S. Treasury to finance the U.S. federal budget deficit, it has also created a
bottleneck on Wall Street among companies that need the Bills to comply with the new rules. It
will be intriguing to see how low the yields on the Treasury Bills will go and how long the rates
will remain that way.
Hopes for European Easing Lift Stocks
October 23, 2015
U.S. stock prices surged after European Central Bank Chief Mario Draghi hinted that the
ECB could expand its easy-money policies at some point later this year. His comments indicated
that the ECB is potentially considering making moves such as purchasing bonds or charging
financial institutions more money to store their excess funds with the central bank. These moves

would be aimed at increasing private-sector spending and investments and would potentially help
to stimulate sluggish global economies. As a result, the Dow Jones rose 320.55 (1.9%). However,
investors still have reason to be cautious, as a rally in Eurozone bonds and decline in the Euro
earlier this year reversed itself and badly burned investors.
One idea that Mr. Draghi mentioned in particular was that the EDB could considering
changing its deposit rate, which currently stands at 0.2%, despite the belief that the rate is
already as low as it can go. This could potentially have a powerful effect on markets, but carries
with it a great deal of risks as well. It will be interesting to see if the actions taken by the ECB in
the coming months will allow them to live up to the lofty expectations that have been developed
based on Mr. Draghis comments.
Week Seven (10/26-11/1)
DJIA: +0.23%

NASDAQ: +0.38%

STOXX 600: -0.11%

OIL: +$2.61 (5.94%)

Weekly Write-Up:
The Federal Reserve is striving to better manage expectations for rates and the economy
as the year winds down. Confusion created by the Feds unwillingness to raise rates has created
even more market uncertainty and division amongst top-ranking officials has further added to
that concern. Only one Fed official, Jeffrey Lacker (President- Richmond) is ready to raise rates
will the rest are divided. Six officials, including Fed Chairwoman Janet Yellen, are only willing
to raise rates if hiring and economic growth continue. The three remaining officials want to see
an increase in inflation and rising wages before they will raise rates.
The Fed concluded its October meeting, and announced that it would continue to hold off
raising rates for now, but explicitly said that a rate hike is still on the table for December. This
served as a pushback against investors who have bet the Fed will not raise rates this year. Before
the announcement, traders in futures markets believed the likelihood of a rate increase was 1-in3, it has since gone up to 1-in-2. This hawkish hold was spurred by previous market
developments in China and Europe and led to a global stock market rally. However, the DJIA and
Stoxx 600 both declined slightly over the following days as the announcement began to sink in.
The Fed also proposed a new bank bailout rule that would place new regulations on how
big financial institutions manage their money. This proposed rule would set a new minimum
Total Loss Absorbing Capacity (TLAC) in an attempt to force these banks to hold enough
reserves on their books that they would not need an infusion of taxpayer money in a time of
crisis.
The Commerce Department announced that sales of durable goods- trucks, turbines, and
other products designed to last at least three years- had dropped by 1.2% due to a strong dollar,
weak commodity prices, and slow economic growth.
New data released from the Securities Industry and Financial Markets Association shows
that the Corporate Bond Market has begun to heat up, as sales by companies with good credit

ratings reached $103 billion for October, a record for the month, signaling investors faith in the
economy.
Stocks Jump after Fed Meeting
October 29, 2015
U.S. stock prices greatly increased after the Federal Reserve announced its decision to
once again hold interest rates. The Down Jones, S & P 500, and NASDAQ rose 1.1%, 1.2%, and
1.3% respectively. In their statement, Fed officials suggested there was less concern about
international economic growth and financial market volatility in recent weeks. This positive
global economic outlook, combined with the fact that rates would still not be increased, was the
primary driving force behind this increase in stock prices.
In September, the Fed also elected to leave interest rates near zero. Markets have rallied
since then, and the Fed has now explicitly stated that a rate increase is still on the table for its
December meeting. Even if the Fed does raise rates in December, they are very unlikely to raise
rates sharply, meaning the effect on global markets would not be too great.
While this rally in the stock market may prove to be temporary, it will be interesting to
see how much things change and what data becomes available between now and the Feds
December meeting. Although speculation may be shifting towards keeping rates at zero, that
could easily change, as shown over the last couple months.
New Curbs on Big Banks
Saturday/Sunday, October 31-November 1, 2015
The Federal Reserve proposed a new rule aimed at preventing any future bank bailouts
that would place new restrictions on how the countrys largest financial institutions manage their
finances. The rule would apply to the eight largest U.S. bank-holding companies and would set a
new minimum level of total loss absorbing capacity (TLAC)- a combination of shareholder
equity and debt, so that they would not be dependent on a taxpayer bailout in the event of a
financial crisis. This number would be around 18% of risk-weighted assets and is expected to
increase if for firms that are considered to pose greater risks. The 18% requirement seems to be
less than some had feared, as some Fed watchers had expected a 20% minimum.
While the banks like this rule because it will eliminate the perception of too big to fail,
some believe that the proposal goes beyond what is necessary to ensure they would not need a
bailout.
As far as I am concerned, I greatly like the idea of this new rule. I do not believe any
institution should ever be too big to fail and still have my doubts about how the last set of
government bailouts was handled a few years ago. This rule should increase accountability
amongst these firms, which I wholeheartedly support. If preventive action can be taken to deter
these institutions from making decisions that could lead to a financial crisis similar to 2008, that

I believe it is taking. It would, however, be interesting to see how the Fed would react if any one
or several of these institutions needed a taxpayer bailout at some point in the future.
Week Eight (11/2-11/8)
DJIA: +0.46%

NASDAQ: +0.39%

STOXX 600: +0.85%

OIL: -$1.85 (4.01%)

Weekly Write-Up:
Dow Jones pushed back into the black for 2015, signaling an ease in concerns about
Chinese growth and emerging markets that caused prices to decline in August and September.
Chinese President Xi Jinping announced that China had lowered its expected growth rate
to 6.5%, sending the strongest signal yet that China may be shifting to a slower pace of growth.
Many economists had already been skeptical over Chinas growth. The IMF which is typically
more bullish than investors, even projects a growth rate as low as 6.3%, and warned that Chinas
debt level has increased faster than Japan, South Korea, or the United States before their
respective recessions.
Janet Yellen used a congressional testimony to criticize the risk management at the largest
U.S. financial firms. She also reiterated that a December rates increase was possible, which
caused stock prices to fall.
The Labor Department released its Jobs Report for October, showing that U.S. employers
had added jobs at the quickest pace this year and further adding to the belief that the Fed will
raise rates in December. The report listed several signs of resurgence, including; gains in
nonfarm payrolls, an in increase in the overall number of full time workers, and stronger wage
growth despite low overall inflation.
Dow Industrials Moves Back Into Black for 2015
November 3, 2015
For the first time since July, the Dow Jones Industrial Average pushed pack into positive
territory, rising 165.22 points (0.9%). The S & P 500 and NASDAQ both saw increases, as well,
and are also currently showing positive growth for the year. These gains indicate a decrease in
concerns over Chinese economic growth and emerging market stability that had previously sank
stock prices in August and September. Solid earnings by companies and loose monetary policy
from major central banks have also positively affected market developments. In the S & P 500,
energy stocks rose the most, followed by health-care. It will be interesting to see how the Dow
Jones fares over the coming weeks and whether or not it will be able to sustain its growth or shift
back into negative territory.
China Lowers Expectations
November 4, 2015

In a move that has become the most compelling indicator that the Chinese economy may
be shifting towards a slower pace, Chinese President Xi Jinping stated that a growth rate as low
6.5% would still allow the country to meet its economic goals, lowering expectations for an
economy that investors were already very skeptical of. Mr. Xi warned that the Chinese economy
faces both domestic and global uncertainties and began to reveal details of the Chinese
governments five-year plan to combat this economic uncertainty. Two parts of this plan are
increasing consumer spending and gradually raising the retirement age to help a labor force that
is being negatively impacted by an aging population.
While the target growth rate of this plan will not be announced until March, until then,
China will have a target growth rate of around 7%- its lowest in twenty-five years. The IMF,
U.S., and many other see a modest slowdown in China as appropriate after years of exponential
economic growth.
Although the President was short on specifics, Chinas plan calls for supporting new
drivers of economic growth, namely expanding consumption, but also relies heavily on old
drivers, like increasing exports and investing in infrastructure. It also called for making the yuan
freely convertible and usable over the next five years.
I found this article to be very intriguing because it does a good job of illustrating the
current state of Chinas economy and puts it into perspective within a global context. It will be
interesting to see if China is able to shift from a manufacturing-economy to a consumer-economy
over the next coming years and if it is able to bounce back and produce growth rates similar to
what it has had in recent years. What I found most intriguing about this article is that it
mentioned that China has increased its level of debt faster than the U.S., Japan, or South Korea
before each of their respective collapses. It will be interesting to see if the Chinese economy
follows a similar path and enters into its own recession, which could in turn have a strong
negative impact on the global economy.
Week Nine (11/9-11/15)
DJIA: -2.74%

NASDAQ: -3.29%

STOXX 600: -1.69%

OIL: -$3.13 (7.13%)

Weekly Write-Up:
The Dow Jones began the week by sliding back into negative territory for the year, and
would continue to slide as the week progressed. Energy shares had the greatest negative shift,
while oil prices hit a 2 month low. Tech shares also suffered. The stock market continued to
slide in the wake of the terrorist attacks on Paris, as the DJIA, NASDAQ, and Stoxx 600
experienced significant declines across the board.
According to a Wall Street Journal Survey, the majority of economists now expect a rate
hike in December, with 92% of those surveyed indicating the believe the Fed will raise rates
before years end, illustrating the growing optimism over the outlook of the global economy. In
contrast, according to data from trade researcher Zepol Corp., imports fell in both September and
October at the three largest U.S. seaports, which has led to fears of an economic slowdown.

In Asian markets, data was released that showed Japans economy had contracted for the
second straight quarter, while Chinas capital outflows reversed in October, signaling that efforts
to keep money from leaving the country may be having their desired effect.
Dow Drops Back to Negative on Year
November 10, 2015
After pushing pack into the black last week, the Dow Jones fell back into negative
territory amid concern amongst investors over a potential rates increase and the global economic
outlook. The Dow fell 179.85 points (roughly 1%), as investors sold off some of the years
biggest gainers and losers alike. However, losses were not limited to merely the Dow, but came
across the board. The S & P 500 and Nasdaq also fell roughly 1% each, and in the international
market, the Shanghai Composite, Japans Nikkei, Hong Kongs Hang Seng Index. Australias S
& P ASX 200, and South Koreas Kospi all fell as well.
These declines were driven, at least in part, by data from over the weekend that showed
Chinas exports had fallen for a fourth straight month, as well as a warning of fading growth in
global trade from the Organization for Economic Cooperation and Development. It will be
intriguing to find out if stock prices are able to rebound over the coming days. At the same time,
it will also be interesting to see if Chinese economic policy decisions are able to help fuel growth
and whether it will change the outlook of the global economic market.
Fed Hike Seen Next Month as Growth Hurdles Fade
November 13, 2015
It is now looking increasingly likely that the Federal Reserve will elect to raise rates
before the end of the year. A survey of 63 economists conducted by the Wall Street Journal found
that 92% of these economists believed that the Fed would raise rates after their December
meeting. Of these economists, fewer than half saw downside risks to their economic forecasts.
This shift in sentiments is due mainly because a handful of immediate economic risks have
begun to fade in recent weeks. Congress has lifted the debt ceiling, the stock market rallied from
a slump, and October saw the greatest increase in job growth this year. It also underscores why
several key Federal Reserve policy makers have expressed confidence in being able to raise rates
next month for the first time in nearly a decade.
However, while the risk of an abrupt economic collapse may have faded, expectations for
economic growth have not actually changed that much. The projected unemployment rate has not
been changed and neither have growth projections for the current quarter. At the same time,
when asked what the biggest threat to the economy was, 71% of economists pointed to
international factors, including sluggish economic growth and the deterioration of China. It will
be interesting to see how the global markets continue to develop between now and December
and whether economic sentiments will shift again.