Investors will be tuning in to a couple “critical concepts” that may surface Wednesday after the Federal Reserve’s policy meeting, including the extent to which the Fed sees markets doing some of its work tightening financial conditions, according to BlackRock’s Rick Rieder.
“I personally feel like they shouldn’t try and reduce employment in this country” in a bid to bring down service-level inflation, partly because it’s not just wage growth that’s fueling it, said Rieder. He thinks the Fed should “pause and see how the data manifests itself because the risk of overtightening is significant.”
Meanwhile in markets, Treasury yields have surged this year and U.S. stocks have slumped for three straight months through October. The Dow Jones Industrial Average DJIA and S&P 500 SPX both just booked their worst October since 2020, while the Nasdaq Composite COMP saw its worst October since 2018, according to Dow Jones Market Data.
“Core services ex shelter” is running at an annualized 3.2% pace over the past six months through September, down from 8% in September 2022, according to Rieder. Rieder is also monitoring commercial real estate, regional banks and corporate finance markets for pressure created by the recent jump in Treasury yields. In corporate debt markets, large investment-grade companies don’t seem to be facing “much stress at all” as most have termed their borrowings out, but there’s “a bit” of refinancing worry among riskier borrowers in the leveraged loan market, he said.
“Why do you need to own the long end of the yield curve?” said Rieder. “The long end of the yield curve has more volatility than the equity market,” he said. “It doesn’t give you any more yield than the front end.”
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Stock Market Today: Stocks slide, Treasury yields steady as Fed decision loomsInvestors are bracing for a key Fed rate decision, as well as the Treasury's quarterly refunding statement, with stocks moving lower heading into the start of Wednesday trading.
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