Unexpectedly Intriguing!
January 28, 2015

Going into Wednesday, 28 January 2015, investors had believed that the Fed was likely to indicate that the U.S. economy was performing solidly enough that it would begin to implement its plan to hike short term interest rates before the end of 2015-Q2 in June 2015.

In fact, when the Federal Reserve's Open Market Committee released its statement following the end of their two day meeting, that was the first impression that investors had, as stock prices spiked upward just after the statement was released at 2:00 PM.

But then, they kept reading past the first several sentences and reset their expectations accordingly given what the Fed was really saying....

S&P 500 on 28 January 2015

What the Fed was really saying is that they still expect to start hiking short term interest rates in 2015, but they won't start by the end of 2015-Q2 as they had previously indicated. Given their concern for the substantial decrease in the growing rate of inflation, the Fed effectively directed investors to refocus their rate hike expectations toward a more distant point of time in the future.

Fed Shifts Investors Attention to More Distant Future on 28 January 2015

And that's why stock prices fell, because the expectations that coincide with the Fed's decision to continue to be patient mean that the future they expect for the U.S. economy is not as bright as it would be if they were to begin hiking interest rates sooner.

In effect, the Fed has moved the goalposts for investor expectations. And in doing so, has sent stock prices to follow a lower trajectory than they otherwise would have followed.


About Political Calculations

blog advertising
is good for you

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts


This year, we'll be experimenting with a number of apps to bring more of a current events focus to Political Calculations - we're test driving the app(s) below!

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

Visitors since December 6, 2004:

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links
Charities We Support
Recommended Reading
Recommended Viewing
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.