Bloomberg News reports that the bonds, stocks, and dollar witnessed small moves at the beginning of the week. It was for the central banks whose rate decisions will determine the tone for the markets worldwide for the remaining part of the year.
What about the S&P 500 Index?
The S&P 500 closed at almost 4450. Brent Oil paired the gains after hitting approximately $95 per barrel Monday. This was a move that further raised concerns, adding to inflation. Apple Inc., surged while Tesla Inc. dropped as the Goldman Sachs Group Inc. dipped the estimates of its earnings for the electric automaker giant.
The 10-year yields from the Treasury edged lower than those on the 2-year notes that remained above 5%.
It began with the Federal Reserve Wednesday and concluded with the Bank of Japan two days later. The monetary policy will be decided upon at the key meetings across almost half of Group of 20. The central banks of advanced economies might draw focus. The global policymakers have been adapting to the theme US officials set out at Jackson Hole in August. The rates will likely stay higher for a little longer.
The Fed will keep the rates on hold in the current week. The traders will focus on the dot plot summary of the economic forecasts. Currently, two main questions are arising, the first being whether or not the policymakers will retain projections for a more than 25 basis point surge by the end of the year. And second is the amount that they intend to ease as they start penciling in for the next year, 2024. As of June, there was a projection of 1% point of cuts.
Why will the Fed continue to sound hawkish?
The Fed will likely continue to be hawkish, with one hike remaining for 2023. The prospect of the easing out being very slow is also a probability over the next few years. David Kelly revealed that the chief global strategist is associated with J.P Morgan Asset Management.
While the policymakers might plan for a smooth drop in the rates, there is always a risk of an economic downturn. He observed that it would also likely trigger a faster easing.
What do experts say?
Bloomberg News reports that Lisa Shalett, associated with Morgan Stanley Wealth Management, states that while the bullish investors continue harping on the progress about headline inflation. This key parameter is closely watched. The Fed Chair Jerome Powell suggests that there will be a “higher for longer” rate path.
Kelly also added that it does make sense to diversify it. A defensive portion across the equities extends duration within a fixed income. This is likely to happen as the risk of an economic glitch grows on top of a monetary tightening.
