Outgoing Federal Reserve Bank Chair Janet Yellen has conveyed that that solid economic growth, faster wage increases and a tightening labour market will lead the U.S. central bank to continue to raise interest rates gradually, as it has signalled it will. With this statement she will hand over the baton to Governor Jerome Powell, the next FED chief.
But the above statement and the U.S. government’s monthly payrolls report showing biggest wage gains for workers since 2009 took the stock market for a toss since 2016. Seeing the stock markets consistent rise gave Trump the ammunition to prove his detractors wrong who were questioning his policies effect on US. But now he will be bothered ahead of congressional elections later this year.
With the yield on the benchmark 10-year Treasury bond on pace to top 3.50% this year for the first time since April of 2011 and Fed’s current projection of three rate hikes for this year, risk-free bonds are the preferred oasis for US investors as compared to stocks. However in this falling stock market, Consumer discretionary stocks and other growth-oriented sectors such as technology and financials will outperform other sectors due to rise in inflation and recent slashing of tax rates.
NPowersU Expert Opinion
At last US investors have something to cheer about other than risky equities and park their funds in risk free bonds. This gives them leeway to enhance their returns with a larger investment basket just as their peers in other developing countries like India enjoy. Trump may have some reasons to worry but we are sure that his business acumen will once again be successful in tiding over this tide as well.
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