Global stocks wavered on Tuesday even after a number of key Federal Reserve speakers reminded market participants the central bank would continue to support the economy, leaving investors to focus on the prospects for post-pandemic growth.
After a more hawkish Fed outlook last week, New York Fed President John Williams offered a more relaxed view on Monday by saying he expects the recent spike in inflation to be temporary.
St. Louis Fed President Bullard said the Fed ought to set up its taper so it could be adjusted if necessary, raising the prospect that the pace could change depending on the strength of the economic recovery and inflation outcomes, Deutsche Bank analysts said.
But Williams, who expects inflation to return to the Fed’s target of 2% next year, said he still sees tapering as “quite a ways off,” suggesting it was too soon to change current central bank policy. According to Deutsche Bank, a dispersion of views from the Fed committee is more healthy compared to a year of its coordinated messaging.
UBS said the time for investors to look ahead and position their portfolios for key trends that will shape the second half of 2021 and beyond is now, not at a later date.
“If we look around today, we see economies reopening, inflation spiking, and equity volatility at its lowest level since before the pandemic,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said. “But if we look forward, we see something different.”
Fed Chair Jerome Powell said late Monday the Fed would do everything it can to support the economy “for as long as it takes to complete the recovery.” He remained optimistic, saying the job market should pick up in coming months as vaccinations rise.
“Given that financial markets were panicking over the end of the global reflation trade in the days before, it is impossible to guess whether the Powell comments are merely a temporary pause to the global reflation trade unwind or mark the end to the correction,” Jeffrey Halley, a senior market analyst at OANDA, said.
The broad cryptocurrency sell-off continued on Tuesday after China summoned leaders of the country’s largest banks to reiterate a ban on crypto services. Bitcoin fell 2% to $32,355, ether fell 4% to $1,920, and dogecoin fell 23% to 19 cents.
Elsewhere in Europe, Prime Minister Boris Johnson said it is “looking good” for July 19 to mark the lifting of coronavirus restrictions. But he didn’t rule out the chance of further lockdowns in the winter.
Asian markets mostly rose on the prospect of global recovery trade, following their retreat a day earlier, after Powell’s dovish comments.
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