Analyst Drops Sharp Take on Fed Rate Hikes

What happened

Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, argued that continued weakness in technology shares could stop the Federal Reserve from raising interest rates again in December, given the sector's outsized influence on the U.S. stock market and economy.

Confirmed

Global impact / market context

Technology stocks make up a large share of the stock market and economy, so a deeper selloff could weigh on economic activity and change the Fed's decision. Investors use rate expectations to set the price of stocks, the dollar and gold.

Analyst inference

The article says the probability of a December rate hike slipped to roughly 72% from 80% a day earlier, using the CME FedWatch Tool, which shows traders' bets on Fed moves. Boockvar said markets are becoming slightly less convinced another increase is coming.

Analyst inference

What to watch

1. Watch whether technology stocks keep falling. The article says continued weakness in tech shares is the condition Boockvar links to the Fed holding rates steady in December. Confirmed
2. The CME FedWatch Tool showed the chance of a December hike near 72%, down from about 80% a day earlier. Watch whether this reading keeps slipping. Confirmed
3. If the Fed pauses, Boockvar expects the U.S. dollar to weaken and real interest rates to fall. That could affect foreign investors who own U.S. tech stocks and the price of gold. Analyst inference

Evidence

• gurufocus.com