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Jul 22 2015

Looming Fed Rate Hike and Recession Risks

During Congressional testimony last week, Fed Chair Janet Yellen provided further evidence that a Fed rate hike is forthcoming, saying: “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target…” At the same time, she made it clear that the Fed “is not going to raise rates…if we think it’s going to tip the economy into a recession.”

This, of course, was said with an eye towards potential stock market reactions. In this context, our latest analysis provides answers about the current vulnerability of the U.S. economy to recession, as well as the cyclical risk of stock market corrections due to valuation concerns.

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