How many Fed rate rises this year..... zero?

In late 2015 the Fed raised rates 0.25% and signaled 4 further rises over 2016.   In early 2016 the market assigned an 84% chance to one or more rate rises (see graph below):  

But a lot has happened in a month..... Markets became very edgy - worrying about China and weak commodity prices.  The knock on effect could be the US economy under-delivering on growth, making interest rate rises in the US a lot less likely.  Below is the current market outlook - a 95% chance of zero rate hikes in 2016: 

What an incredible change in a short space of time.  Does it matter?  Yes, this signals that the Fed's levers aren't working as planned - which hurts sentiment.  What are the market implications?  Here's a few thoughts (1) equities:  a delay to rate hikes is positive for utilities and property stocks (2) global bonds:  may not be hammered this year as some had feared (3) currency: expected gains for the USD (and depreciation of the NZD) may take a little longer to wash though.

John Berry    (Source for graphics:  Dailyshot)


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