<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/569e431add089514388b45c9-1920-960/robot_hotel_phillips_griffin.still001.png" alt="Robot Hotel" data-mce-source="Henn'na Hotel" /><p class="source"><span>Henn'na Hotel</span></p><p class="caption">Robot hotels? Just the beginning.</p></div><p></p></div></div>One day, the robots will take over.</p><p>That's what George Mason University Robin D. Hanson theorizes about in his upcoming <a href="http://www.amazon.com/Age-Em-Work-Robots-Earth/dp/0198754620/ref=sr_1_1?ie=UTF8&amp;qid=1452724602&amp;sr=8-1&amp;keywords=The+Age+of+Em++Work%2C+Love+and+Life+when+Robots+Rule+the+Earth">"The Age of Em: Work, Love and Life when Robots Rule the Earth."</a></p><p>At the center of Hanson's theory is "emulated mind," or "em" for short. Basically, he says that one day - in 400 to 600 years, by his estimation - we're going to be able to create a perfect virtual replica of the human brain, which will yield the equivalent of a mind, kind of like Scarlett Johansson's character in "Her." </p><p>Those "ems" could exist solely in virtual space, or they could have physical bodies of some sort, depending on what tasks they're being built for. Hanson says that this will be equivalent to the Agricultural or Industrial Revolution: a complete change in the way society is organized. </p><h2> 1: Humans will retire.</h2><p>The thing about robots, once they can do tasks that require high levels of intelligence, is that they're simply going to out-compete people. </p><p>Humans "may still be rich, owning most of this robotic economy," Hanson says, "but they will still have to retire and live off their retirement payment."</p><p>It's like when an individual person gets older and decides to retire, he says, but in this case it's the entire human race. That will open up a ton of leisure time in the best-case scenario.</p><p>The worst case (or at least a very bad one) is that only a few individuals or corporations own the world's robot labor, meaning that lots of people would be locked out of the economy, making retirement a much less appealing option. That would be pretty dystopian.</p><h2><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/569e431add089514388b45ca-2400-1200/her-joaquin-phoenix-41.jpg" alt="her joaquin phoenix 41" data-mce-source="Warner Bros." /><p class="source"><span>Warner Bros.</span></p><p class="caption">Joaquin Phoenix in "Her."</p></div><p></p></div></div>2. Robots could be immortal. </h2><p>"Compared to humans," Hanson says, robots "can be immortal, in that they can be infinitely repaired." </p><p>But, Hanson says, we don't infinitely repair most cars and houses, so it's not like <em>every</em> robot will be repaired to the point of immortality. But some certainly could.  </p><h2>3. Nature will be at more at risk than ever. </h2><p>"We often love nature, but in addition, we are reasonably afraid that if we kill nature, we will die, because our biological bodies. depend in many ways on nature," Hanson says.</p><p>But mechanical life forms won't depend on oxygen in the same way we do. </p><p>"If our robots are made in factories, they may love nature and want to save it, but they need not fear that killing nature will kill them," Hanson says. "So that puts nature more at risk."</p><h2>4. It will be possible to rapidly expand the population (of robots). </h2><p>It takes a long time for a human being to develop from birth to being able to play a role in the economy. If you're getting your PhD, it could be into your 30s.</p><p>But "robots don't have to be trained and raised from adulthood," Hanson says. In theory, they could be manufactured with valuable skill sets, which would allow the labor force to grow rapidly. </p><h2>5. The economy will go nuts. </h2><p>Because of all the labor offered by a robot population, it will be possible to get an unprecedented amount of work done. </p><p>"Instead of doubling every fifteen years like today," Hanson says, the global economy "could double every month or week of even faster." </p><p>Total economic growth could speed up by <a href="http://www.techinsider.io/predictions-for-after-singularity-2015-11">60 to 250 times the current rate</a>.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/a-pyramid-on-ceres-baffles-nasa-2016-1">NASA scientists are baffled by a mysterious pyramid structure they found in space</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="t4ODYxMDE6W2094u9FSKZagVraSWGpAe" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 't4ODYxMDE6W2094u9FSKZagVraSWGpAe',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

An economist told us 5 huge changes that could happen when robots take over the economy

<ul><li><strong>The students at <keyword id="55119" type="COMPANY" weightage="20" keywordseo="Indian-Institute-of-Technology">Indian Institute of Technology</keyword> (BHU) will have a <keyword id="424539" type="PERSON" weightage="20" keywordseo="humanoid">humanoid</keyword> share her experiences in 60 different expressions today (February 14) — and probably answer their questions too. <br /></strong></li><li><strong>Sophia — the world’s first robot citizen — will interact with the students approximately for an hour at the institute in Varanasi.<br /></strong></li><li><strong>The event coincides with Sophia’s birthday too. The female robot was developed in 2016 by the Hong Kong based Hanson Robotics and ‘activated’ on February 14.</strong></li></ul>This Valentine’s day, students at the Indian Institute of Technology (BHU) will have a humanoid share her experiences in 60 different expressions — and answer their questions too. <br /><br />On the sidelines of the institute’s annual fest ‘Technex,’ Sophia — the world’s first robot citizen — will interact with the students approximately for an hour at the institute in Varanasi. This will be a first for the campus, where a robot programmed with artificial intelligence and facial expressions will converse and address the student’s unscripted questions.<br /><br />“The event will witness Sophia take impromptu questions from the audience, IIT-BHU dean of students Professor B N Rai told Business Standard. <br /><br />The event coincides with Sophia’s birthday too. The feminine robot was developed in 2016 by the Hong Kong based Hanson Robotics and ‘activated’ on February 14. She was first seen at the Southwest Festival in Austin, USA.<br /><br />She has a social media presence, too. <br /><br />In October 2017, Sophia received citizenship from Saudi Arabia. Ever since then, the humanoid citizen has delivered several talks at the Indian universities — including <keyword id="61708" type="COMPANY" weightage="20" keywordseo="IIT-Bombay">IIT Bombay</keyword> and <keyword id="50307" type="COMPANY" weightage="20" keywordseo="Banaras-Hindu-University">Banaras Hindu University</keyword>. She made her debut in India in 2017 with IIT-B — where she was seen in a saree and talked on AI and contemporary global issues.<br /><br />As many as 20,000 IITians will participate in the fest organized by the Science and Technology Council.<br />

This Valentine’s day, IIT (BHU) students will chit-chat with the world’s first female humanoid ‘Sophia’

<p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/5387379deab8ea7025b3646a-1200-632/101708893-google-car.1910x1000.jpg" border="0" alt="google car driverless self-driving" /><p class="source"><span>Google</span></p></div><p></p></div></div>Google's self-driving driving automobile technology could lead to more densely populated cities that are twice their current size, <a href="http://nextbigfuture.com/2014/05/for-self-driving-car-future-traffic.html">according to Brian Wang at Next Big Future</a>.</p>
<p>From the outset of its driverless car project, Google has emphasized that humans are unreliable drivers and that a robotic driving system will be safer. Indeed, Google's self-driving automobiles have already clocked 700,000 road miles without so much as a speeding ticket. That's a safer driving record than most humans can claim.</p>
<p>So imagine a world where the driverless car is the norm. It would enable cars to pass each other more safely without any alterations or additions to current road infrastructure. Wang says road carrying capacity could be increased up to <em>four times</em>, which means cities could accommodate more people's transportation needs without a major redesign.</p>
<p>This might sound unlikely, but consider China. The percentage of Chinese people living in cities quadrupled in the last fifty years, in part because of improved transportation, according to Karen C. Seto of Stanford's Freeman Spogli Institute for International Studies.</p>
<p>It's normally an expensive investment in infrastructure to accommodate a population boom, but "automatic cars" don't need this. <a href="http://nextbigfuture.com/2014/05/for-self-driving-car-future-traffic.html">Here's Wang</a>:</p>
<p style="padding-left: 30px;"><span>Economist Robin Hanson noted that doubling the population of any city requires only about an 85% increase in infrastructure, whether that be total road surface, length of electrical cables, water pipes or number of petrol stations. This systematic 15% savings happens because, in general, creating and operating the same infrastructure at higher densities is more efficient, more economically viable, and often leads to higher-quality services and solutions that are impossible in smaller places. Interestingly, there are similar savings in carbon footprints - most large, developed cities are 'greener' than their national average in terms of per capita carbon emission.</span></p>

Google's Self-Driving Cars Could Double The Size Of Our Cities

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5848120fdd089533448b4fd7-909/screen shot 2016-12-07 at 132525.png" alt="Lord Pannick" data-mce-source="YouTube/Sky News" /><p class="source"><span>YouTube/Sky News</span></p><p class="caption">Lord Pannick QC will be at the heart of proceedings on Tuesday, when the Supreme Court rules on the government's Article 50 appeal.</p></div><p></p></div></div>Good morning! Here's what you need to know on Tuesday.</p><p><strong><a href="http://uk.businessinsider.com/trump-signs-executive-order-on-tpp-2017-1">President Donald Trump has signed an executive order regarding his intent to pull the United States out of the Trans-Pacific Partnership trade deal.</a> </strong>It's a "great thing for the American worker, what we just did," Trump said at the White House as he signed the order, <a href="https://www.bloomberg.com/politics/articles/2017-01-23/trump-said-to-sign-executive-order-on-trans-pacific-pact-monday">according to Bloomberg</a>. The TPP deal, which would lower tariffs for 12 countries around the Pacific Rim, including Japan and Mexico but excluding China, was negotiated under the Obama administration. However, it was not ratified by Congress.</p><p><strong><a href="http://uk.businessinsider.com/supreme-court-brexit-article-50-case-verdict-preview-gina-miller-2017-1">One of the most important legal cases in British history will reach its conclusion on Tuesday morning.</a></strong> The Supreme Court's 11 justices will rule whether Theresa May must secure parliamentary approval before triggering Article 50 and initiating the country's formal departure from the European Union. The verdict is set to be handed down at 09:30 a.m. (GMT) by Supreme Court President Lord Neuberger.</p><p><span><span><strong><a href="http://uk.businessinsider.com/eu-warns-theresa-may-about-post-brexit-trade-deal-with-trump-usa-2017-1">Senior EU figures are telling Britain to forget about negotiating a trade deal with the US or any other state as long as it remains a member of the 28-nation bloc.</a> </strong>Under current EU treaties, Britain can neither strike nor even begin to negotiate any trade agreement with countries outside of the Union until it has formally terminated its membership, which is expected to occur in March 2019.</span></span></p><p> <strong><a href="http://www.businessinsider.com/r-goldman-sachs-files-1-billion-countersuit-against-indonesian-businessman-2017-1">Goldman Sachs filed a $1 billion counter lawsuit on Tuesday against an Indonesian businessman who is seeking damages from the U.S. bank for conducting what he called "unlawful" trades in the shares of a property firm.</a> </strong>Benny Tjokrosaputro, president director of Indonesian property developer PT Hanson International Tbk , filed a lawsuit in a Jakarta court on Sept. 8 against Goldman's unit, Goldman Sachs International.</p><p><strong><a href="http://www.businessinsider.com/r-nikkei-falls-on-trumps-protectionism-banks-lead-losses-2017-1">Japanese stocks slipped on Tuesday.</a> </strong>Stocks declined as U.S. President Donald Trump's protectionist policy stance rattled investors while banks led the losses on sliding U.S. and global bond yields. The Nikkei average fell 0.6% to 18,787.99 while the broader Topix dropped 0.6% to 1,506.33.</p><p><strong><a href="http://uk.businessinsider.com/theresa-mays-industrial-strategy-robotics-ai-and-other-rd-central-2017-1">The government is putting cutting edge technologies such as artificial intelligence (AI), 5G wireless internet, "smart" energy technology, and robotics at the heart of its new post-Brexit industrial strategy.</a> </strong>Theresa May launched the government's "Modern Industrial Strategy" on Monday at a regional meeting of the cabinet in the North West.</p><p><strong><a href="http://uk.businessinsider.com/us-senate-committee-backs-rex-tillerson-secretary-of-state-2017-1">Rex Tillerson's bid to be secretary of state narrowly won approval Monday from the Republican-led Foreign Relations Committee.</a></strong> The move all but assures Senate confirmation of President Donald Trump's choice to be the nation's top diplomat. Members of the committee voted along party lines, 11-10, to back<span>Tillerson</span> following a contentious confirmation hearing nearly two weeks ago that stoked concerns he might not win the panel's recommendation.</p><p><a href="http://uk.businessinsider.com/yahoo-q4-2016-earnings-2017-1"><strong>Yahoo has delayed the timeframe for closing </strong><span><strong>its $4.8 billion acquisition by Verizon, as the company grapples with additional questions related to a pair of major security breaches that recently came to light.</strong> </span></a>"Given work required to meet closing conditions, the transaction is now expected to close in Q2 of 2017," Yahoo said on Monday. The company had previously said the deal would close in the first quarter of the year.</p><p><strong><a href="http://www.businessinsider.com/r-japan-january-flash-manufacturing-pmi-shows-fastest-expansion-in-almost-three-years-2017-1">Japanese manufacturing activity expanded in January at the fastest pace in almost three years as export orders surged, suggesting that overseas demand is not as weak as some economists and business leaders had feared.</a></strong> The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 52.8 in January from a final 52.4 in the previous month.</p><p><strong><a href="http://uk.businessinsider.com/gchq-director-robert-hannigan-resigns-2017-1">Robert Hannigan, the director of UK spy agency GCHQ, has announced that he will resign from the agency that he joined in 2014.</a> </strong>GCHQ announced the news in a blog post on January 23. It said that Hannigan will leave his job once a successor has been chosen for the role.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/most-interesting-men-world-watches-rolex-breitling-jorg-gray-2015-8">These are the watches worn by the smartest and most powerful men in the world</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="N3NGJ0djpb_DdQzkXVopAvbq5AmmiuOx" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'N3NGJ0djpb_DdQzkXVopAvbq5AmmiuOx',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

10 things you need to know in markets today

<p><img class="float_right" src="http://cdn.static-economist.com/sites/default/files/imagecache/original-size/images/print-edition/20131102_FNC674_0.png?maxX=580&amp;maxY=638" border="0" alt="" title="" width="580" height="638" style="color: #000000; font-size: 15px;" />ON AN enormous campus in Shenzhen, in the middle of China's manufacturing heartland, nearly a quarter of a million workers assemble electronic devices destined for Western markets. The installation is just one of many run by Foxconn, which churns out products for Apple among other brands, and employs almost 1.5m people across China. In America Foxconn has become a symbol of the economic threat posed by cheap foreign labour. Yet workers in China and America alike, it turns out, face a shared threat: they have captured ever less of the gains from economic growth in recent decades.</p>
<p>The "labour share" of national income has been falling across much of the world since the 1980s (see chart). <span style="font-size: 15px; line-height: 1.5em;">The Organisation for Economic Co-operation and Development (OECD), a club of mostly rich countries, reckons that labour captured just 62% of all income in the 2000s, down from over 66% in the early 1990s. That sort of decline is not supposed to happen. For decades economists treated the shares of income flowing to labour and <keyword id="36749" type="ORGANIZATION" weightage="60" keywordseo="capital">capital</keyword> as fixed (apart from short-run wiggles due to business cycles). When Nicholas Kaldor set out six "stylised facts" about economic growth in 1957, the roughly constant share of income flowing to labour made the list. Many in the profession now wonder whether it still belongs there.</span></p>
<p>A falling labour share implies that productivity gains no longer translate into broad rises in pay. Instead, an ever larger share of the benefits of growth accrues to owners of capital. Even among wage-earners the rich have done vastly better than the rest: the share of income earned by the top 1% of workers has increased since the 1990s even as the overall labour share has fallen. In America the decline from the early 1990s to the mid-2000s is roughly twice as large, at about 4.5 percentage points, if the top 1% are excluded.</p>
<p>Workers in America tend to blame cheap labour in poorer places for this trend. They are broadly right to do so, according to new research by Michael Elsby of the University of Edinburgh, Bart Hobijn of the Federal Reserve Bank of San Francisco and Aysegul Sahin of the Federal Reserve Bank of New York. They calculated how much different industries in America are exposed to competition from imports, and compared the results with the decline in the labour share in each industry. A greater reliance on imports, they found, is associated with a bigger decline in labour's take. Of the 3.9 percentage-point fall in the labour share in America over the past 25 years, 3.3 percentage points can be pinned on the likes of Foxconn.</p>
<p>Yet trade cannot account for all labour's woes in America or elsewhere. Workers in many developing countries, from China to Mexico, have also struggled to seize the benefits of growth over the past two decades. The likeliest culprit is technology, which, the OECD estimates, accounts for roughly 80% of the drop in the labour share among its members. Foxconn, for example, is looking for something different in its new employees: circuitry. The firm says it will add 1m robots to its factories next year.</p>
<p>Cheaper and more powerful equipment, in robotics and computing, has allowed firms to automate an ever larger array of tasks. New research by Loukas Karabarbounis and Brent Neiman of the University of Chicago illustrates the point. They reckon that the cost of investment goods, relative to consumption goods, has dropped 25% over the past 35 years. That made it attractive for firms to swap labour for software whenever possible, which has contributed to a decline in the labour share of five percentage points. In places and industries where the cost of investment goods fell by more, the drop in the labour share was correspondingly larger.</p>
<p>Other work reinforces their conclusion. Despite their emphasis on trade, Messrs Elsby and Hobijn and Ms Sahin note that American labour productivity grew faster than worker compensation in the 1980s and 1990s, before the period of the most rapid growth in imports. Studies looking at the increasing inequality among workers tell a similar story. In recent decades jobs requiring middling skills have declined sharply as a share of total employment, while employment in high- and low-skill occupations has increased. Work by David Autor of MIT, David Dorn of the Centre for Monetary and Financial Studies and Gordon Hanson of the University of California, San Diego, shows that computerisation and automation laid waste mid-level jobs in the 1990s. Trade, by contrast, only became an important cause of the growing disparity in wages in the 2000s.</p>
<p>Trade and technology's toll on wages has in some cases been abetted by changes in employment laws. In the late 1970s European workers enjoyed high labour shares thanks to stiff labour-market regulation. The labour share topped 75% in Spain and 80% in France. When labour- and product-market liberalisation swept Europe in the early 1980s-motivated in part by stubbornly high unemployment-labour shares tumbled. Privatisation has further weakened labour's hold.</p>
<p>Such trends may tempt governments to adopt new protections for workers as a means to support the labour share. Yet regulation might instead lead to more unemployment, or to an even faster shift to automation. Trade's impact could become more benign in future as emerging-market wages rise, but that too could simply hasten automation, as at Foxconn.</p>
<p>Accelerating technological change and rising productivity create the potential for rapid improvements in living standards. Yet if the resulting income gains prove elusive to wage and salary workers, that promise may not be realised.</p>

All Around The World, Labor Is Losing Out To Capital 

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/566cb6ba69bedddd092887c8-1200-924/nutcracker-ballet-3.jpg" border="0" alt="nutcracker ballet" style="color: #222222; font-size: 15px; line-height: 22.5px;"><p class="source"><span>REUTERS/Leonhard Foeger</span></p><p class="caption">Dancers of the opera ballet perform during the dress rehearsal of Peter Ilyich Tchaikovsky's "The Nutcracker" (Der Nussknacker) at the state opera in Vienna.</p></img></div><p></p></div></div><span style="color: #222222; font-size: 15px; line-height: 22.5px;"></span></p><p>The Federal Reserve has closed a <a href="http://www.businessinsider.com/fed-funds-rate-chart-2015-12">7-year long, uncertain chapter</a> in US economic history.</p><p>In a <a href="http://www.businessinsider.com/dissents-may-show-feds-future-path-2015-12">unanimous decision</a> on Wednesday, the Fed's Federal Open Market Committee (FOMC) <a href="http://www.businessinsider.com/federal-reserve-announcement-december-16-2015-12">lifted its target fed funds rate</a> to a corridor of 0.25%-0.50% from 0$-0.25%.</p><p>"The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2% objective," the Fed said in its FOMC statement. "The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2% inflation."</p><p>In other words, the economy has improved enough to warrant a rate hike. But for the doubters, keep in mind that rates are still extremely low.</p><p>And as for the future of rates?</p><p>"The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run," the Fed added. "However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."</p><p><span style="font-size: 15px; line-height: 1.5em;">So as we now try to figure out what gradual means, here's your Monday Scouting Report:</span></p><p><strong>Top Stories</strong></p><ul><li><strong>Defining 'gradual'</strong>. On Friday, Richmond Fed President Jeffrey Lacker sees the Fed hiking rates four times in 2016. "That's half the rate at which we raised rates in the last tightening cycle," he said. "So that's what 'gradual' means to me." According to the Fed's "<a href="http://www.businessinsider.com/fed-dot-plot-december-2015-2015-12">dot plot,</a>" the median member of the FOMC see the fed funds rate ending 2016 somewhere between 1.25% and 1.5%.<br><br>"Having used the word gradual, along with showing four hikes in 2016, the Fed risks having market participants assign a definition to gradual as being every other meeting," Morgan Stanley's Ellen Zentner said. "We suspect inserting the word gradual was the only way to get a <a href="http://www.businessinsider.com/dissents-may-show-feds-future-path-2015-12">unanimous decision</a> to hike rates."<br><br>But ultimately, it's hard to say what "gradual" really means. Here's Bank of America Merrill Lynch's Ethan Harris and Michael Hanson: "Perhaps more interesting is what the Fed didn't do or say. While the FOMC repeated that they would go 'gradually' they did not offer more specific calendar guidance. They emphasized that the timing of future moves will depend on the data not the calendar. In the past year the Fed has only adopted calendar guidance as a last resort. And while Yellen repeated that the Fed would move gradually, she purposely stayed away from any discussion of specific meetings and noted the Fed remains data dependent."</br></br></br></br></li></ul><p><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/5671cbbe72f2c122008b62d2-1200-600/fed-funds-wide.png" border="0" alt="fed funds wide"><p class="source"><span><a href="https://research.stlouisfed.org/fred2/series/DFF#">Business Insider/Andy Kiersz, data from FRED</a></span></p></img></div><p></p></div></div></p><p><strong>Economic Calendar</strong></p><ul><li><span style="text-decoration: underline;">Q3 GDP (Tues)</span>: Economists estimate Q3 GDP growth will be revised to 1.9% from <a href="http://www.businessinsider.com/us-gdp-q3-2015-11">last month's estimate of 2.1%</a>. Personal consumption growth is expected to be revised down to 2.9% from 3.0%. Here's Credit Suisse: "Since Q3 GDP's first revision, we have seen further downward revisions to manufacturing and wholesale inventories. The latest data on Q3 durable goods shipments also are looking weaker. And newly-released "hard data" on service spending suggest a downward revision to personal consumption on health care last quarter."</li><li><span style="text-decoration: underline;">Existing Home Sales (Tues)</span>: Economists estimate the pace of sales declined 0.4% to an annualized rate of 5.34 million units. Here's Wells Fargo's John Silvia: "Based on a three-month moving average, existing home sales are up almost four percent over the past year and are expected to continue to strengthen in 2016. The one sticking point, however, is the unusually low level of inventories, which is also keeping prices in a higher range than would otherwise be the case. Home prices have risen faster than incomes which means affordability is declining. Moreover, the recent increase in the Fed's short-term interest rate is causing some consternation about mortgage rates. Although mortgage rates are expected to increase somewhat, we are expecting a flatter yield curve, which means any increase should be relatively modest."</li><li><span style="text-decoration: underline;">Richmond Fed Manufacturing Index (Tues)</span>: Economists estimate this regional manufacturing index improved to -1 in December from -3 in November.</li><li><span style="text-decoration: underline;">Personal Income And Spending (Tues)</span>: Economists estimate income climbed 0.2% in November while spending increased by 0.3%. Here's Morgan Stanley's Ted Wieseman: "A slower gain in average hourly earnings and dip in hours worked pointed to only a slight uptick in wage and salary income in November after a strong October gain, which should lead to a muted gain in overall personal income. For spending, a pickup in core ex autos and gas retail sales (+0.6%) provides a boost, but unit auto sales were flat, Energy Department figures showed lower volumes on top of lower prices hitting gasoline spending, and another month of unusually warm weather likely depressed utilities demand again."</li><li><span style="text-decoration: underline;">Durable Goods Orders (Tues)</span>: Economists estimate orders fell 0.7% in November. Nondefense capital goods orders excluding aircraft, or core capex, is expected to have declined by 0.2%. Here's RBC Capital: "Boeing orders were quite strong in November and thus the nondefense aircraft space should support topline durable goods orders nicely. We look for a +1.5% read on the broad measure. The guts of the report will likely be mixed. The headwinds facing the manufacturing arena from a strong USD/weakening commodity complex/slower global growth remain in place and should weigh on capex orders in the near term. That being said, extremely easy base effects should make for a firmer capex profile in H1 2016."</li><li><span style="text-decoration: underline;">New Home Sales (Tues)</span>: Economists estimate the pace of sales climbed 2.0% to 505,000 units in November. Here's Credit Suisse: "New home sales may have posted some moderate improvement in November. The warm weather that month likely served as a marginal boost to selling activities, although the dip in the NAHB housing market index did not point to strong upside potential."</li><li><span style="text-decoration: underline;">U. Of Michigan Sentiment (Tues)</span>: Economists estimate this index of sentiment registered at 92.0 in December, up from the <a href="http://www.businessinsider.com/umich-consumer-confidence-december-11-2015-12">preliminary estimate of 91.8</a>. This would be up from <a href="http://www.businessinsider.com/university-of-michigan-consumer-confidence-index-2015-11">91.3 in November</a>. Here's HSBC: "Declining gasoline prices have helped boost sentiment, particularly for lower income households. On the other hand, some households expressed concerns about international economic conditions."</li><li><span style="text-decoration: underline;">Initial Jobless Claims (Thurs)</span>: Economists estimate initial claims declined to 270,000 from 271,000 a week ago. Here's Deutsche Bank's Joe LaVorgna: "Thursday's jobless claims figures should point to ongoing improvement in the labor market, which is a key reason why consumer attitudes should remain relatively upbeat."</li><li><a href="http://www.businessinsider.com/2015-stock-bond-market-holiday-calendar-trading-schedule-2015-11">US stock markets will close</a> at 1pm ET on Thursday, December 24 and they'll be closed all day on Friday December 25.</li></ul><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56769e0f69bedd1729d7b0dc-1200-924/chicago-trader-1.jpg" border="0" alt="chicago trader"><p class="source"><span>Getty Images</span></p><p class="caption">Traders react at the close of the futures markets in the Dow Jones Industrial Average stock index futures pit at the Chicago Board of Trade.</p></img></div><p></p></div></div></p><p><strong>Market Commentary</strong></p><p>Now that the Fed has begun hiking rates, the question is: Now what?</p><p>The answer isn't simple. Rate hikes happen because the Fed thinks the economy is in good shape, so that should be a bullish indicator. But rate hikes also mean higher borrowing costs, which is bearish.</p><p>Historically, <a href="http://www.businessinsider.com/how-stocks-move-around-first-fed-rate-hikes-2015-2">stocks have a tendency to just go up</a>. But that's not to say there isn't a <a href="http://www.businessinsider.com/stocks-and-interest-rates-2015-12">spike in volatility</a> in the near term.</p><p>Citi's Tobias Levkovich share we he's observed in a note to clients on Wednesday.</p><p>"History suggests that the first Fed Funds rate hike does not unsettle markets, but the third or fourth does generate concern," Levkovich said. "Given Citi's economists' view of the Fed taking the funds rate to 1.0% by the end of 2016, it is fair to suggest that the equity rally could be restrained by the latter half of next year."</p><p>This seems to imply that getting to between 1.25% and 1.5% by the end of the year as implied by the Fed's dot plot would mean a lot of volatility in 2016.</p><p>Levkovich adds that 2016 isn't just about rate hikes.</p><p>"Furthermore, the policy uncertainties tied to the upcoming elections could be another factor holding back investor positioning as to which sectors are poised to outperform or underperform," he said. "Valuation concerns abound, but a normalized earnings yield gap metric using higher bond yields suggests market gains in the next year."</p><p><a href="http://www.businessinsider.com/citi-levkovich-rising-labor-costs-pressure-profit-margins-sp600-2016-2015-12">Levkovich is overall positive</a> on the stock market. He sees the <a href="http://www.businessinsider.com/citi-mid-2016-sp-500-target-2015-5">S&amp;P 500 heading to 2,300 by mid-2016</a>. On September 4, he introduced a 2016 year-end target of 2,200.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/humanoid-robot-iran-engineering-2015-12">Engineers in Iran have created a robot that imitates human behavior with scary accuracy</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="swOXVreTpmpcmC5vvlg1enl_n61wKup7" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'swOXVreTpmpcmC5vvlg1enl_n61wKup7',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

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