The Dot Plot, Treasuries and the TSX.V

Richard (Rick) Mills
Ahead of the Herd

Page 1 of 3

As a general rule, the most successful man in life is the man who has the best information

 

The Federal Reserve has finally raised their target for the Fed Funds rate. In a unanimous vote members decided to raise rates by 25 basis points to 0.25 - 0.50 per cent. It was the first hike since June 2006 when then Fed head Ben ‘helicopter’ Bernanke increased the benchmark rate from 5 to 5.25 percent.

 

How far and how fast will the Fed's rate-hike cycle go? Maybe Federal Reserve members themselves can tell us that…

 

Dot plot

 

Each member of the Federal Open Market Committee (the FOMC is the branch of the United States Federal Reserve that determines the course of monetary policy), have anonymously provided their predictions for the future target fed funds rate. The Fed releases those predictions in a chart with each member getting one dot at their target interest rate level for each time period.

 

september vs december dot plot

 

The bank's "dot plot," suggests as many as four rate hikes in 2016 and a Fed funds rate of 3.5 to 4.0 percent longer term.

 

Why am I looking at increasing yields? Read on…

 

Here’s a chart of the old VSE and the now TSX.Venture.

 

http://www.crushthestreet.com/wp-content/uploads/2015/12/FMF-Chart.jpg

chart two Business Insider

 

I like chart two for a couple reasons:

1. It shows a bear market, the inevitable rise being a bull market, the top of the bull market, the bear market or the slide down, the bear bottom, the rise or bull market.

2. Shows the VSE/TSX.V has not dropped below 500.

 

Below is a current one year chart of the TSX.V, is the bottom in, maybe close to in?

 

chart three

 

With the majority of companies listed on the TSX Venture being involved in the resource sector – commodities – it might seem logical to believe, and you certainly couldn’t be faulted for it, that the TSX.V is a commodities price driven exchange. When commodities are doing well, the exchange does well and of course vice versa.

 

chart four

 

The TSX.V (chart three) is close to historic lows, commodity prices (chart four) have literally fallen off a cliff. A logical assumption would be that the TSX.V is a commodities price driven exchange - but you’d be wrong.

 

TSX.V bull and bear markets are driven by the Feds overnight rate increases/decreases and the direction of U.S. Treasury bond yield increases or decreases.

 

1|

2|

3|

Next»



Ahead of the HerdSponsors List


No Charge  Newsletter Signup

 

Newsletter Unsubscribe


To contact us please email rick@aheadoftheherd.com

Ahead of the Herd
www.aheadoftheherd.com