The Federal Reserve’s looming rate hike could be a positive development for the stock market, according to Ethan Harris, Bank of America (BAC) Merrill Lynch’s co-head of global economics research. ‘In a way hiking rates is the ‘Good Housekeeping’ seal of approval from [Fed Chair] Janet Yellen,’ he said. ‘It’s her saying the economy is in better shape and can sustain growth even with higher interest rates, so you could argue that it’s actually a positive for the equity market.’ Low rates and unprecedented central bank action have helped propel stocks to record highs, causing investors to worry about how stocks will react to higher rates. The S&P 500 is up over 200 percent since its March 2009 low, following the financial crisis. ‘[A Fed rate hike] is an endorsement of improvement, rather than a Fed trying to hurt growth,’ he said. While the Fed passed on announcing a rate hike during its June meeting last week, Harris thinks the Fed will be ready to pull the trigger in the coming months. ‘I do think that by the time we get to the September meeting, the Fed will be ready to hike and will have seen enough improvement in the [economic] data,’ Harris added.
Subscribe to TheStreetTV on YouTube:
For more content from TheStreet visit:
Check out all our videos:
Follow TheStreet on Twitter:
Like TheStreet on Facebook:
Follow TheStreet on LinkedIn:
Follow TheStreet on Google+:
source
