In a surprise to no one the Federal Reserve raised interest rates a quarter of a percent at its meeting last week. The Fed also signaled a possibility of three more rate hikes next year. Our equity ETFs didn’t react to this increase because bond prices have been signaling this for quite some time and investors have incorporated this action into their expectations. After all TLT, the 20yr treasury bond ETF, has been declining for most of this year (i.e. yields have been increasing) and its price is near two year lows (yields near two year highs). The Fed is only now doing what the bond market has been doing for most of the year.

With higher rates GLD continues to have a tough time relative to our other long term positive ETFs. GLD’s arrow has shifted from green to the cautionary yellow as it is now within 5% of changing it’s long term direction to negative from positive. Remember, this is just a cautionary arrow and not necessarily an indication of an imminent arrow change.

Last week emerging markets and small caps showed a little weakness but both groups are still close to their highs.

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