Market may be guilty of gambler's fallacy on Fed rate hikes

Sydney

WHEN successive coin flips turn up heads, a gambler's instinct would dictate the next toss results in tails - even if the odds are still 50-50.

That's the so-called gambler's fallacy, and financial markets are at risk of making the same mistake of emphasising past precedent when it comes to Federal Reserve interest-rate hikes, some investors warn. While traders have been lulled by a record of the Fed proving less hawkish than expected, things could change over the coming year.