US Fed expected to pause rate hike: Will the bulls be back in the stock market?

The US Federal Reserve is anticipated to stop interest rate hikes this week, which will likely support global stock markets more broadly than simply mega big tech stocks, says the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.

Bulls seem to be back in the US stock market. The bullish analysis from Nigel Green of deVere Group comes as investors worldwide wait for the US central bank’s latest monetary policy decision.

Green says: “Mega cap tech stocks – namely Apple, Microsoft, Nvidia, Amazon, Meta, Tesla and Alphabet – have made up around 90% of gains on Walls Street’s S&P 500 this year. But we expect that other sectors which have been outperformed so far in 2023 are likely to get a boost should the Fed, as we anticipate, pause rate hikes this week.”

The deVere CEO continues: “Despite a stubbornly robust labour market and still too-sticky inflation, the markets now expect the world’s most influential central bank to pause its interest hike agenda today.

“This will firmly signal that progress is being made in the battle to cool inflation and this will buoy investors across the board, finally providing a boost to sectors which have been unloved so far this year.”

Last week, Nigel Green warned investors against exclusively buying into the hype of the tech titans, or so-called Magnificent Seven.

“The volume is getting louder and the frenzy is reaching fever pitch. This hype is dangerous as it could lead investors to assume that these stocks are a silver bullet to build long-term wealth – and they are not, at least not on their own,” Green noted.

“While I believe that exposure to these mega-cap tech stocks should be part of almost every investor’s portfolio, as they have robust fundamentals and are future-focused, especially in AI, they should not be exclusive.”

Easing inflation – as would be indicated by a Fed pause this week – would, says the CEO, stimulate a “wider global stock market rally” that would be “positive across a broad sweep of asset classes, sectors and regions.”

However, the commentary by Fed Chief Powell in the press conference may hold cues for the investors if the Fed has shed its aggressiveness in fighting inflation or has some more ground to cover. Powell’s speech may tilt the markets in either direction starting June 14.