NEW YORK - A U.S. stock market perched at record highs received an encouraging message from the Federal Reserve, after the central bank stuck with its rate cut projections for 2024 despite stronger-than-expected economic growth.
While not all investors were confident the Fed will be able to deliver on its rate cut projections, Wednesday's market reaction was positive. But investors this year have had to temper their expectations for easing, reducing estimates for cuts from 150 basis points priced into futures markets at the start of January to around 80 basis points.While the Fed left its rate cut projections unchanged on Wednesday, it did acknowledge the economy’s strength, raising its forecast to 2.1% expansion in 2024, from an earlier forecast of 1.4%.
Miskin is overweight U.S. large cap stocks relative to his benchmark. Draho, of UBS, has a larger-than-usual position in small caps relative to large caps in his portfolios in part because he sees the U.S. economy closer to the start of a business cycle than toward the end, which should benefit companies with more domestic exposure. The small-cap-focused Russell 2000 index is up 2.4% year-to-date.
“I am skeptical,” said Eric Vanraes, head of fixed income at Eric Sturdza investments in Geneva, Switzerland. The Fed’s views of growth are “not really consistent with three rate cuts.” Jon Mondillo, head of North American fixed income at abrdn, said he was looking to add duration, a measure of a bond portfolio's sensitivity to interest rates, but wanted to wait for more confirmation that the Fed is on the path to easing.
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