The shock victory of Donald Trump in the presidential election has roiled financial markets, creating new uncertainty about the economic outlook, which is anathema to the Federal Reserve.
The election result has raised doubts among investors that the central bank will follow through with its widely telegraphed interest-rate hike next month.
Trump’s victory increased volatility in the market. Implied volatility on the S&P 500 SPX, -0.36% , as measured by the CBOE Volatility Index VIX, -11.53% , shot up.
“The Yellen Fed hates uncertainty, and falling stock prices, and tends to react to both by not doing what it had previously planned to do,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Odds of a December Fed rate hike fell below 50% in the wake of Trump’s victory according to Bloomberg News, citing U.S. overnight indexed swaps. The odds were as high as 82% on Tuesday.
The CME’s FedWatch tool did not show such a steep drop, putting the odds of a December rate hike at 67%, down from over 71% prior to Election Day.
Shepherdson said he puts the odds of a December rate hike at “no more than one in three.”
He said that consumer and business confidence will likely…
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