Rate Hikes Always Spook Investors

Friday's big "fear of a rate increase" selloff in stocks was not getting a bearish follow-through during Monday's session. While it is too early for the bulls to declare victory, the Fed has been telegraphing a rate hike for some time. From The Wall Street Journal:

"It just feels like people are starting to shrug off the Fed," said Tom Carter, managing director and trader at JonesTrading. "The economy is strong. Unemployment is going down. All the numbers have come in OK and we're going higher. On a relative basis, people like the U.S. economy"... the Fed is likely to take a slow approach to raising rates, paving the way for relatively low interest rates for a while longer. And easing actions by major central banks, particularly by the European Central Bank, will help keep global interest rates low.

Is The Big Picture Concerning?

This week's stock market video compares 2015 to vulnerable periods in 1987 and 2007, allowing us to better understand possible downside risks in equities.

Greece Issue Still Lingers

It comes as no surprise that Europe is still trying to iron out a debt deal for Greece, a topic that remains on the market's radar. From Reuters:

The head of euro zone finance ministers urged Greeceon Monday to "stop wasting time" and buckle down to serious talks on implementing a reform program to secure urgently needed fresh funds from its international creditors. Ministers spent barely 30 minutes discussing Greece at their monthly meeting, an EU official said, stressing it was time for Athens to engage in serious, detailed discussions with experts from the European Commission, the European Central Bank and the International Monetary Fund - formerly known as the "troika".

Investment Implications - The Weight Of The Evidence

The evidence deteriorated enough last week for our model to recommend a slight reduction in exposure to risk. As shown in the chart below, the S&P 500 has several areas between 2033 and 2064 where buyers may become more interested. We will see how things play out between now and Friday's close.