The Federal Reserve’s pushback on expectations for interest-rate cuts over the past two weeks has investors closing watching inflation data and piling more cash into money-market funds.
“He really put a big damper on it,” said Deborah Cunningham, chief investment officer, global liquidity markets at Federated Hermes, a group that had $560 billion in money-market assets as of Dec. 31. “The market got ahead of itself in November and December.” “The equity market wouldn’t notice, but the bond market is certainly listening to Powell,” said George Catrambone, head of fixed income at DWS Group, in a phone interview.
“I do think the Fed is pleased with the inflation progress thus far, but we need to see more,” Catrambone said. With that backdrop, he remains an advocate of investing in the front-end of the Treasury yield curve, particularly with rates on 6-month Treasury bills BX:TMUBMUSD06M above 5% for nearly a year.Read: Recession fears evaporate in new forecast of top economists
“Investors too focused on the recession crystal ball went into cash, enticed by high rates,” Hetts said. But by avoiding stocks, investors would have missed out on the S&P 500’s roughly 23% advance in the past 12 months, according to FactSet data. The S&P 500 SPX on Friday closed above the 5,000 mark for the first time ever, while gaining 1.4% for the week to close at a record 5,0526.61, according to Dow Jones Market Data.The Dow advanced less than 0.1% for the week, ending at 38,671.69, while the Nasdaq rose 2.3% for the week, finishing at 15,990.66, only 0.4% off its previous record from November 2021, according to Dow Jones Market Data.
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