Monday, September 14, 2015

Interest Rates Will Rise Again, But When?

Seems the stock market is waiting forever for the Fed to raise interest rates. This uncertainty is leading investors to take a "risk off" approach, and thus we have the 10% correction we've lived through the past few months.

Thomas H. Kee Jr. speculated on Marketwatch today that if Fed Chair Janet Yellen raises rates, it could lead to a market crash, because the Fed's curtailing of its economic stimulus plan has amounted to a tightening monetary policy, and any further tightening (by raising interest rates) would be a problem. Especially for those owning stocks.

I tend to think the market has priced in a rise in interest rates, and the market may rise when it finally happens, assuming the Fed is transparent about being willing to loosen monetary policy in the future if the economy starts to stumble. According to most metrics -- employment, corporate earnings -- the American economy is booming, and I continue to see it doing so.

Stocks to watch:

Schlumberger (SLB), the oil services equipment provider, and Chevron (CVX) may recover if Saudi Arabia succumbs to pressure from less well-heeled members of OPEC and is forced to stop flooding the market with oil.

SLB is trading at 72.69; our 6-month target is 85 by March, 2016
CVX is trading at 75.78; target is 90 by March, 2016

Disney (DIS) should benefit when the latest Star Wars sequel is released in December.

DIS is trading at 103.75; our target is 125 by March, 2016

Apple Inc. (AAPL) is rumored to be working on a TV streaming service that will cost $40 a month. If that comes true -- as J.P. Morgan said it will in a note today -- then apple should rise nicely.

AAPL is trading at 115.33; our 6-month target is 130 by March, 2016

Disclaimer: As always this blog is my opinion only. We do not give tax or investment advice or advocate the purchase or sale of any security or investment. You should always seek the assistance of a professional for tax and investment advice. 

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