Mid-sized businesses are optimistic about the economy heading into 2016, but that does not mean they are not seeking to reduce risk where they can, said Tony Bedikian, managing director of Global Markets at Citizens Bank.
"They are looking to mitigate risk in certain sectors, particularly on their interest rate risk management and their currency risk management sides," said Bedikian, adding that he offers foreign exchange products to clients looking to repatriate funds from multiple countries around the world.
A number of companies were hit by the strong dollar during the third quarter and Bedikian expects that to continue through next year. He said the dollar's ascent is primarily the result of an interest rate differential story that combines the Federal Reserve's looming rate hike and the continued easing of foreign central banks.
"We have that disparity in both rates and economies, U.S. versus global, and that in general is a dollar-strengthening story," said Bedikian.
Bedikian said the 10-year Treasury bond has had a wide range in 2015 from 1.65% to almost 2.5%, yet has returned to where it started at the beginning of the year around 2%. In his view, the market has priced out a Fed tightening this week.
"We have roughly seven weeks left of data before the Fed's meeting in December with two payroll numbers to go so all eyes will be on the U.S. payroll numbers going forward," said Bedikian.
The U.S. economy created 142,000 jobs in September. Economists, however, had been expecting the report to show 203,000 new jobs. Unemployment held at 5.1%, according to the Labor Department.
Finally, Bedikian said any widening of spreads in the high-yield market is not having a significant impact on his middle market clients.
"Our clients are still looking to borrow money and expand going forward," said Bedikian.