How will the Fed's interest rate hikes impact the economy and market next year?

Overall, we believe that the market is strong enough to overcome measured interest rate hikes, so we are not concerned about the Fed's actions. In a vote of confidence for the current state of affairs, the Fed is acknowledging that that the economy no longer needs the monetary boost of keeping interest rates below its current growth rate. In raising rates, the Fed has in effect moved to a neutral interest-rate stance, where Fed policy should neither impair nor stimulate the economy. Now, the market must instead rely on good fiscal policy and corporate cash flows to drive it. Another benefit of recent interest rate hikes is that they provide some dry powder so that the Fed has the option to lower interest rates should a negative event occur that would call for a liquidity boost to dampen the shock, much like 1987, 1998 or September 11th.

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