With quantitative easing set to end next month, the Fed is on track to start raising interest rates next year, most likely in the June quarter. The anticipation and then reality of this could cause some volatility in shares.
However, once it gets underway Fed tightening is likely to be gradual and history tells us that it’s only when rates reach onerous levels that they become a real threat to share markets and ultimately economic growth.
Progress towards eventual rate hikes in the US will put further downwards pressure on the $A, which we see falling to around $US0.80.
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