Federal Reserve policymakers on Tuesday said they adopted a "tilt" toward the possibility of raising short-term interest rates in the months ahead, depending on economic strength and the pace of inflation. What will that mean for global markets? Here are some things to watch:
Bonds: Will Long-Term Yields Fall?
Yields on 30-year Treasury bonds tend to reflect inflation fears more than the possibility of a modest increase in short-term rates. If the 30-year T-bond holds steady or declines, it could signal waning inflation fears--and lessen the need for a Fed rate hike. 30-year T-bond yield, weekly closes and latest:
Tuesday: 5.88%
U.S. Stocks: Can the Rally Keep Broadening?
Investors' interest in smaller stocks has surged recently, partly reflecting optimism about the economy. So if the market rally continues to broaden, it could be a bullish sign for the economy--but that might also raise the odds of a Fed rate hike. Number of stocks rising versus number falling on Nasdaq each week:
Tuesday: 176.06
Foreign Stocks: Will the Pace Slow?
Many overseas markets have raced ahead this year on expectations of a global economic recovery. Those markets now face a key test: whether improving fundamentals in Asia and elsewhere can overcome the negative effects of a possible Fed rate hike.
