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Shares ended a mixed week after initially rising on Friday following Treasury Secretary Janet Yellen’s call for a broad stimulus package to help accelerate the economic recovery.
Four experts discuss what his comments mean for the markets and how to invest as the pandemic continues.
Jim Stewart, columnist for The New York Times, says the benefits of overspending far outweigh the risks.
“The question is, is there a greater risk of going over budget than under spending? That’s pretty clear. I mean, what’s the risk of too much stimulus? higher interest rates down the road, maybe a little bit of inflation, but as Yellen pointed out, we have the tools to deal with that. The risk of under-spending is increasing unemployment big, a downward spiral in the economy, maybe a recession. It’s a lot harder to come out of, so I think his take on risk is pretty compelling. … of course, it’s very good for the stock market. I mean, just look at the current levels, which I think largely anticipate this important rally. It’s very bullish, and ironically, the people who own stocks and benefit from them are usually those who have not been as affected by the pandemic. Specific elements that aim to help those affected by the pandemic pandemic, I think it’s a very straightforward instrument. It’s not very specifically designed to help these particular people, and I think that’s something that has troubled some of the critics, but nonetheless, if what you’re trying to do is keep the economy booming. , you know it won’t be perfect. “
Liz Young, Director of Market Strategy at BNY Mellon Investment Management, welcomes the rate hike.
“The real question here is whether rates should go up and why are they going up? And I think yes they should go up, and they are going up because the economy is expanding, we expect further expansion later in the year we expect a big improvement in business data, and we expect some inflation. Inflation continues to have a kind of bad reputation. Inflation means there is has healthy demand in the economy, so I welcome the rate hike. And the question of what is the breaking point, when is it important to the market, I don’t know what the magic number is, I don’t don’t know there’s a magic number on the mental threshold of when it’s actually going to turn I think it depends more on how quickly we get there. And if we gradually increase the rates throughout the year , I think it’s okay and we can s digesting it, then I am okay with this rate increase. I think there is going to be volatility in 2021 on the Treasury curve. I would look into this volatility and use this as a buying opportunity if it causes stocks to pull back. “
Katerina Simonetti, Senior Vice President of Morgan Stanley Private Wealth Management, looks at how changing consumer behavior could impact markets.
“The market has been strongly supported. It is strong. The earnings season has offered some nice surprises. And I think we definitely go along with the reopening philosophy and supporting the cyclical names and supporting the reopening story. and reposition our portfolios to reflect what’s going to happen in this post-vaccine, post-Covid era, which is really exciting. But that said, I think consumers have developed some very powerful habits over the past nine months and household names certainly shouldn’t be overlooked. There is a place for them in the portfolio. And, you know, we sure pay attention to them and own them. “
George Cipolloni, portfolio manager at Penn Mutual Asset Management, examines how Federal Reserve policy has shaped investor behavior.
“When you think about the impact of the Fed, they had two major impacts here – they kept interest rates low, which pushed asset prices up. And second, they spurred some behavior on the market where people tend to be a bit more irresponsible. And we’ve seen this through some examples of specific actions like GameStop. … It’s behavior that’s driven by Fed action, so that’s something to be careful with. And then just go back to this reflation operation, I think that’s important. We are income investors, so you see a dramatic impact on the bond market today. ‘Yeah, and I think that’s another thing that’s very, very important to watch out for. “
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