Can we count on a Fed liftoff before 2016?

Global economic data continues to be evaluated by market participants through the lens of potential Federal Reserve actions.

Weaker global manufacturing surveys and a relatively soft U.S. September employment report seemed to indicate to market participants that Fed liftoff could be delayed past the end of 2015. Friday’s futures market pricing indicated odds of a Fed rate increase by December at less than one in three. However, we believe economic trends should, in general, improve sufficiently to warrant a December liftoff.

Income data for August indicated that consumers began to spend their rising incomes and dip into savings. Consumers may now be spending some of the windfall from lower energy prices, which could provide support to the U.S. economy through the last half of the year. This support may also help offset the softness in manufacturing activity, potential inventory destocking, and the potential easing of auto sales from the highest levels since 2005.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.

This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The organizations mentioned in this publication are not affiliates or associated with U.S. Bank in any way.

Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment.

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