Not Much To Keep The Fed From Raising Rates Now: Fasten Your Seat Belts

What happens now?

• The $US gets stronger (other currencies weaken).
• Anyone with $US debt obligations will not only have to pay more (of their own currency) but borrowing will get more expensive.
• This will not be helpful for struggling emerging economies.
• This will likely not be helpful for the global economy.
• Global volatility in financial markets will rise.
• Cash (and cash equivalent securities) and long duration government securities will be the safest place to be for the time being.
• As we have suggested on this blog for some time, a defensive investing posture (less risky assets) will be helpful.

Why?

Not only were the headline US employment numbers stronger than expected, but wages jumped as well, which indicates the potential for wage inflation. this will be enough for the Fed to raise rates in December.

The Canadian labour force data was also better than expected, but the increase in employment was mostly part-time.