US stock market investors are waiting with bated breath to see the outcome of the Jackson Hole Fed’s annual Economic Policy Symposium, which is scheduled to be held by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming between August 26 and 28, 2021. From the Minutes of the recently-held Fed’s meeting, it appears the tapering of monthly asset purchases may start this year. All eyes will, therefore, be on the Fed Chair Jerome Powell statements rolling out from the Jackson Hole meeting sending any signals for the monetary and economic policies for the years ahead.
Lisa Shalett Chief Investment Officer, Wealth Management says, “More market participants now anticipate the likelihood of more aggressive Fed moves to scale back its accommodative policies enacted after the pandemic-induced global market crash in March, 2020, and the deep recession that followed. With some members of the central bank recently offering competing timelines on when to start tapering, the Fed’s annual Economic Policy Symposium in Jackson Hole, Wyoming, at the end of August has taken on greater importance.”
With the US economy appearing to be at pre-Covid levels and the employment figures throwing up positive surprises, the impending rise in interest may soon be witnessed in the economies. This could have an impact on bonds and equities, if not for the long term, at least in the short to medium term. “When rates move higher, long-term bond prices will decline, given their inverse relationship.
Higher rates can also hurt growth stocks because they effectively lower the value of future earnings. Investors who currently own these assets, or passive index funds that have significant exposure to them, may want to consider taking profits and redeploying cash into high-quality, fairly valued stocks of companies that are tied to economic growth and have the potential to grow their dividends,” suggests Shalett.
For long term investors, any dip in the prices of mega cap stocks and shares of firms that will have a bigger role to play in the post-Covid world may be accumulated. Covid-19 fears have still not subsided and stocks are reacting to the rising number of cases in some parts of the world including America. The global markets are near their all time highs and a cautious approach needs to be taken considering the change in the economic environment that looks plausible in the near future.