CURRENT
POLL

Equity markets 2018

Will the equity markets remain friendly in the upcoming year?

71.43%
Y
28.57%
N
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Fed supports markets

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The US central bank signalled the continuation of its loose monetary policy at its FOMC meeting on 27 April. This is remarkable given that along with the short-term stabilisation of the Chinese economy, this Fed policy is one of the most important reasons for the price rises of risky assets since February.

Tendency for interest rate hikes remains in place
The Fed funds rate is kept within a range of 0.25% to 0.50%. At the same time the FOMC retains its intention to gradually raise the Fed funds rate. It may, however, take its time doing so.

Worries regarding the global economy have decreased
In the press release the central bank has expressed slight relief with regard to the global economy and the financial market even though both areas have to be monitored closely, along with inflation pressure.

Weakening economic growth in the USA
Instead, economic growth has declined in the USA on the back of all important partial components of economic activity, i.e. consumer spending, corporate investments, and net exports. In addition, industrial production is shrinking. “Only” the labour market continues to improve. However, leading indicators suggest deterioration on that front, too.

Low inflation pressure
In view of the low inflation pressure in the USA the central bank can leave the monetary policy very loose. This generally facilitates a depreciating US dollar relative to the currency basket. This combination of factors keeps the yields of safe Treasury bonds very low and supports risky asset classes such as equities, corporate bonds, emerging markets bonds, and commodities. In addition it increases the leeway for other central banks, particularly in the emerging countries, to cut key-lending rates if need be.

No imminent rate hike
In summary: the Fed has not (yet) put an end to the rally on the markets by announcing any imminent rate hike. For this reason we continue to prefer corporate bonds from the USA, among other instruments.

 

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This document is an advertisement. All data is sourced from ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., Erste Asset Management GmbH and ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the InvFG 2011 in the currently amended version. The simplified prospectus is prepared by ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. and published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the ImmoInvFG 2003 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., Erste Asset Management GmbH and for ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to § 21 AIFMG, the simplified prospectus, and the key investor document/KID can be viewed in their latest versions at the web site www.erste-am.com or www.ersteimmobilien.at or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus or simplified prospectus, the languages in which the key investor document/KID is available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com or www.ersteimmobilien.at.

This document serves as additional information for our investors and is based on the knowledge of the staff responsible for preparing it at the time of preparation. Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.

Gerhard Winzer

Gerhard Winzer has worked at Erste Asset Management since March 2008. Up until March 2009, he was Senior Fund Manager in Fixed Income Asset Allocation; he has been Head Economist since April 2009.

He holds a degree from a polytechnical college and studied economics and business at Vienna ...

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Fed supports markets comment      1 Author Reply

  1. Fischer didn t address the current state of financial markets, although other policy makers, including Fed Chair Janet Yellen, have indicated that they do not see them, on the whole, as being overheated.

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