US roars, we roar
July 20th 2006 15:03
Many of the developed markets around the world, including Australia, are somewhat correlated to US markets movement. The two-year cycle of interest rate hike by the Feds has ended, indicating the US inflationary pressure is loosing steam, and the good news spread out far and wide.
The Dow Jones Industrial Average Index rose 1.9% and on our shore, the ASX 200 benchmark gained 2.0%. One of the best time for the local bourse so far.
Amid the Mid East crisis going on, oil prices actually fell, given that both Israel and Lebanon are non-oil producing countries and being relatively far away from Saudi Arabia and the Indian Ocean where most of the oil are from the former and transported through the latter. The world markets have absorbed the initial effects of the crisis and somehow form a believe that the conflict would not have a long lasting spillover effect.
Back on home front, the issue of another interest rate is still looming for a showdown on August. Only 2 out of 26 economists surveyed believe that the RBA would hold the rate. A near concensus indeed but are the remaining 24 economists who predict a hike hold more weight in terms of interest rate forecast than the 2?
Well, according to a research paper "Just How Bad Are Economists At Predicting Interest Rates?" by Kevin Stephenson (1997) which find evidence that economists surveyed by the Wall Street Journal have no ability to predict interest rates. Does this mean that interest rate forecasts by economist should be taken lightly? Well, afterall they are the expert, give them the benefit of the doubt but at the same time one should always expect the unexpected. Plan!
The Dow Jones Industrial Average Index rose 1.9% and on our shore, the ASX 200 benchmark gained 2.0%. One of the best time for the local bourse so far.
Amid the Mid East crisis going on, oil prices actually fell, given that both Israel and Lebanon are non-oil producing countries and being relatively far away from Saudi Arabia and the Indian Ocean where most of the oil are from the former and transported through the latter. The world markets have absorbed the initial effects of the crisis and somehow form a believe that the conflict would not have a long lasting spillover effect.
Back on home front, the issue of another interest rate is still looming for a showdown on August. Only 2 out of 26 economists surveyed believe that the RBA would hold the rate. A near concensus indeed but are the remaining 24 economists who predict a hike hold more weight in terms of interest rate forecast than the 2?
Well, according to a research paper "Just How Bad Are Economists At Predicting Interest Rates?" by Kevin Stephenson (1997) which find evidence that economists surveyed by the Wall Street Journal have no ability to predict interest rates. Does this mean that interest rate forecasts by economist should be taken lightly? Well, afterall they are the expert, give them the benefit of the doubt but at the same time one should always expect the unexpected. Plan!
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