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"They had to stop this catastrophic loop," said Seema Shah, global investment strategist at Principal Global Investors, which manages more than $ 600 billion in assets.
Inspired by the Fed's turnaround, US stock prices skyrocketed to begin in 2019. This then boosted the confidence of US buyers and policymakers.
"The Fed has made the right choice," said Shah.
After a "series of political gaffes," the Fed has managed to "calm the markets for now," according to Scott Minerd, director of global investment at Guggenheim Partners.
Minerd, however, warned in a recent report that its prediction tools for the recession continued to predict an economic slowdown as of mid-2020.
& # 39; Caught hostage & # 39;
A potential problem that the suddenly thirsty Fed faces is how it would react to an inflation spike.
Although inflation has been under control for a long time, some people wonder how long it will last. With the labor market at full capacity or almost, wages are finally warming up.
"We are planning further wage increases," writes Guggenheim in his report. The firm said a "new rate hike may be needed" in 2020 if inflation expectations began to rise.
Others think that inflation will remain under control despite a historically low unemployment rate.
"I do not think inflation will get out of hand," said Gus Faucher, chief economist at PNC.
But if inflation has been dormant for a long time, the Fed could be forced to resume its cycle of rising interest rates, which could be a problem for the credit-sensitive market and businesses.
"There is a real fear that once inflation occurs, the Fed will be trapped. Will they have to brake suddenly?" said the director's shah.
This could make the "catastrophic loop" between financial markets and trust start all over again.
"One has the impression that they are being held hostage by the market," Shah said.
Wells Fargo continues to recover from its many scandals in recent years. Government regulators, including the Federal Reserve, are watching the issue closely.
5. It's the (American) economy, stupid: Investors looking for new signs of direction for the US economy will have many reports to consider this week.
Retail sales, durable goods, new home sales, industrial production and consumer confidence point to a long list of economic reports to come in the next five days.
6. Coming this week:
Wednesday – US Durable Goods Report
Friday – Report of US Industrial Production and US Consumer Confidence
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