Shares closed a mixed week after initially rising on Friday, following a request from Treasury Secretary Janet Yellen for a large stimulus package to accelerate the economic recovery.
Four experts discuss what her comments mean for the markets and how to invest as the pandemic continues.
Jim Stewart, a columnist for the New York Times, says the benefits of excessive spending far outweigh the risks.
“The question is whether there is a higher risk in overspending than in declining spending? It’s pretty clear. I mean, what’s the risk of too much stimulus? Maybe interest rates are higher along the way, maybe low inflation, but As Yellen pointed out, “We have the tools to deal with this. The risk of insufficient spending is higher and higher unemployment, a downward spiral in the economy, possibly a recession. This is much harder to get out of, so I think his point of view on risk is quite indisputable … Of course, this is very good for the stock market.I just want to say to look at the current levels, which I think largely anticipates this significant stimulus. This is very optimistic, and ironically, people who own and benefit from stocks tend to be the ones who have not been so hurt by the pandemic. demie, I think it’s a very blunt tool. It is not very well adapted to help those individuals and I think it is something that has disturbed some critics, but nevertheless, if what you are trying to do is keep the economy thriving, you know it will not be perfect. “
Liz Young, director of market strategy at BNY Mellon Investment Management, welcomes the increase in rates.
“The real question here is whether rates are rising and why are they rising? And I think yes, they should be growing and growing as the economy expands, we expect a further expansion in the year, we expect a significant improvement in corporate data and we we are waiting for some inflation.Inflation continues to be kind of bad.Inflation means that there is a healthy demand in the economy, so I welcome the increase in rates.And the question of what is the breaking point, when it matters for the market, I do not know what the magic number, I don’t know that there is a magic number about the mental threshold of the moment when it will actually change, I think it’s more about the speed with which we get there. And if we gradually increase the rates throughout the year, I think it’s okay and We can digest it, so I’m fine with this rate hike. I think there will be volatility in the Treasury curve in 2021. I would bow to that volatility and use it as a buying opportunity if I try. here a withdrawal of stocks. “
Katerina Simonetti, senior vice president at Morgan Stanley Private Wealth Management, looks at how changed consumer behavior could impact markets.
“The market has been strong. It’s strong. The earnings season has come as a big surprise. And I think we’re definitely getting on board with the reopening philosophy, following the cyclical names and following the story of reopening and repositioning our portfolios to reflect what’s next.” post-vaccine, post-Covid, which is really interesting, but in saying that, I think consumers have developed some very strong habits in the last nine months and the name of staying at home should certainly not be reduced. place for them in the portfolio. And, you know, we’re definitely paying attention and owning them. “
George Cipolloni, portfolio manager at Penn Mutual Asset Management, looks at 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 led to rising asset prices. And number two, they stimulated a certain behavior on the market, where people tend to be a little more irresponsible. And we saw this through some examples of specific actions, such as GameStop. … This is behavior that is driven by Fed action, so it is something of a precaution. And then going back to this rebate transaction, I think it’s important. We are income investors, so you see a dramatic impact on the bond market today and I think this is another thing that is very, very important to watch. “
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