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The Fed's Decision May Yield A Surprise

Published Fri, 14 Dec 2018 06:15:00 -0500 on Seeking Alpha

The year is now coming to an end, and the final scheduled significant event is the December 18-19 meeting of the Federal Reserve's FOMC where the members of the committee will decide if the Fed Funds rate will rise for the fourth time this year.
In 2015, the Fed hiked rates once and followed the same path in 2016. In 2017, the central bank picked up the pace of increasing the short-term rate with a total of three 25 basis point hikes. At the final meeting last year, the FOMC indicated the market should expect another three hikes in 2018. At the same time, in October 2017 the central began its program of balance sheet reduction. Unlike short-term rate hikes which drive monetary policy, allowing the legacy of asset purchases to roll off the central bank's balance sheet amounts to quantitative tightening and has been pushing interest rates higher in medium and longer-term maturities.
After years of quantitative easing, the Fed's holdings of government debt securities rose over $4.5 trillion which was unsustainable. Since October 2017, GDP growth and the lowest unemployment since the late 1960s caused the Fed to act three times to increase the Fed Funds rate by a total of 75 basis points already in 2018. Fiscal stimulus via tax and regulatory reforms introduced by the administration and approved by Congress turbocharged economic growth. In June, the Fed provided guidance that the market should expect a fourth rate hike in 2018 to keep pace with economic growth.
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Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
GABELLI GLOBAL GOLD NAT RES & INC TRUST 4.44   0.0 0.00 0.00 13.48
ASA 12.30   0.0 0.00 0.02 0.16
SPDR GOLD TRUST 141.32   0.0 0.00 0.00 0.00