Gavekal Capital: Ahead Of The FOMC Minutes: Fed Funds Rate Expectations Continue To Nose-Dive

Wednesday, April 8, 2015

Ahead Of The FOMC Minutes: Fed Funds Rate Expectations Continue To Nose-Dive

Not even a month ago, we wrote about how it looked like the market was pricing in two rate hikes in 2015 and four in 2016. Well, apparently a lot has changed (at least regarding expectations) since then. The December fed funds futures is only pricing in about one hike from the current effective fed funds rate. Fed fund futures are pricing in a 36 basis point fed funds rate for the end of 2015. This is about half the level that the market expected for most of 2014.

Unsurprisingly, 2016 fed funds rate expectations have fallen sharply as well. The market is now only pricing in a fed funds rate of 101 basis points by the end of 2016. This implies the market expects only 2 and half rate hikes in 2016. So we have gotten to the point where the market expects the fed funds rate to only be 20 basis points higher by the end of 2016 compared to where the market expected in September 2014 for the fed funds rate to be by the end of 2015. Rate hike expectations continue to be pushed back.

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
Blogs are posted by our investment team. Find out more about us at here. Read more about our strategy at www.gavekalcapital.com.

Disclosure

The information presented here is for informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. An investor cannot invest directly in an index. Hyperlinks may be included in this message that provide direct access to other internet resources, including web sites. While we believe these links are to reliable sources, Gavekal has no control over the accuracy or content of information contained on these sites. Although we make every effort to ensure such links are accurate, up to date and relevant, we have no control over pages maintained by external providers. The views expressed by these external providers on their own web pages or on external sites they link to are not necessarily those of Gavekal.
The information listed on this blog is for example purposes only and should not be construed as the investment Advisor's opinion or investment outlook. As of the most recent quarter end, the named companies may have been held by the investment Advisor. Please review the most recent disclosures. For full information including additional policies and full disclosures on the Advisor, please visit our website gavekalcapital.com.