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)