David Kelly, the chief global strategist at JPMorgan's investing arm, says continuing splits in the federal government could bridge a gap in stocks.
"That's really a function of the uncertainty that we see with the pandemic and with the political situation. As that uncertainty diminishes, I think things will switch back," he said. "Most of the value in the market is in sort of the boring middle where you've got cheaper valuations." , it looks like Democrats' dreams of an aid bill worth $2 trillion or more are dead. That means weaker economic growth and a weaker dollar compared to other currencies, but Kelly argues that there are other contributors to that trend.
"Over time, the Federal Reserve will have to reduce its support to the federal government in terms of keeping the rates very low on the long end," he said. "I do think that you will see a steepening of the yield curve. I think long-term interest rates will go up somewhat."
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