“Fed Fed” questions as inflation heats up, but low yields will keep shares at stake for Investing.com

Author: Yasin Ebrahim

Investing.com – High inflation threatens to wipe out the Fed put, forcing the Federal Reserve to tighten as the Omicron variant weighs on growth, but the scarcity of alternative attractive investments will keep stocks in vogue.

“By severely limiting the FOMC’s ability to respond to the bad risks posed by Omicron, inflation has effectively destroyed the Fed’s well,” Jefferies (NYSE 🙂 said, as markets shrink significantly, believing Eleda will come up with adaptive policies. .

But while inflation will force the Fed to shake hands, and the central bank will limit its ability to respond to market downturns, it will continue to seek profitability at the stock market, as the benefits offered by U.S. government bonds are unlikely. soon to attract investment dollars.

“[I]Investors will need to find ways to make a profit and a half [on the 10-year Treasury yield] your money won’t be cut, ”Wealth Alliance President and CEO Eric Diton told Investing.com earlier this week.

“That’s really one of the main reasons we’re continuing to rise in global equities, because I don’t think we’re going to see it three or four percent soon, because global rates will continue to be low.”

For months and months, Powell believed that the factors driving inflation were transient.

But all that has changed this week, with the Fed’s headline acknowledging that the central bank had underestimated how long the high inflation would last, and suggested that a slower pace of the December meeting would help control price pressure.

“The economy is very strong and inflationary pressures are high, so I think it’s appropriate to look at lowering our asset purchase limit, which we actually announced at the November meeting, maybe a few months earlier,” Powell said. Testimony before the Senate Banking Committee this week.

The remarks came as a surprise when Powell arrived after pointing out the poor economic risks posed by Covid-19’s Omicron variant.

However, the threat of the new variant is unlikely to prevent an economic recovery, even if it appears on the brink of a “Fed put”, as it is strong enough for consumers to cover the gap somewhat.

“We are still in the midst of a very global economic recovery, although this variant may be unbalanced, it will not prevent this global recovery,” Diton said.

“Consumers account for 70% of GDP and are in a very good economic situation,” Diton added. “It could very well be a decent 10% to 20% correction in stocks, but that would be an option to buy.”