Although the Fed remains committed to its zero-interest-rate policy, investors may be monitoring how the financial markets react to any pickup in inflation.
Investors appear concerned about the Fed’s protracted easy monetary stance and federal fiscal spending in response to the pandemic.
The rising US yield may be placing a spanner in the wheel for the US stock market to move further up. On the back of growth returning in the economy, there is an impending risk of rising inflation which in a way is pushing the 10-year US Bond yields to a level of around 1.6 per cent, a level that remains an important milestone. The global investors who are invested in the US stock market are keeping a close watch on this prime indicator. If taming inflation becomes difficult, the easy monetary policy may see a pause thus impacting equity markets worldwide.
Conscious Capital Wealth Management, LLC in its Monthly Market Insights for March 2021 looks into the various aspects including what the investors may be concerned about during the month. As per them, although the Fed remains committed to its zero-interest-rate policy, investors may be monitoring how the financial markets react to any pickup in inflation.
Investors appear concerned about the Fed’s protracted easy monetary stance and federal fiscal spending in response to the pandemic. For now, inflation remains within the Fed’s target range. However, expectations are rising, with the five-year forward expectations rate reaching a level not seen since 2019.
According to Conscious Capital Wealth Management, minutes from the last Federal Open Market Committee (FOMC) meeting indicate that the Fed has reaffirmed its policy to keep short-term interest rates at current levels and continue its bond purchase program, citing uncertainty about the economy’s continued recovery. While some Fed officials thought that near-term inflation might exceed its 2 per cent target, they also believed that any price pressure would be short-lived.
Federal Reserve will be meeting up this week and will keep the global investors glued to the decisions coming up from them. Since the beginning of 2021, there appears to be a rotation among the sectors as value stocks appear to be a preferred lot over the tech stocks that might have run up a lot in terms of valuations.
In February, the Dow Jones Industrial Average led, picking up 3.17 per cent, the Standard & Poor’s 500 Index rose 2.61 per cent, while the Nasdaq Composite added 0.93 per cent. Any short to medium term volatility in the stock prices may give an opportunity for investors to accumulate quality stocks for the long term.
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