Damian Testi, Investment Manager, comments on the Federal Reserve’s impending monetary policy decision.
The overwhelming market consensus is that we will see no change to the federal funds rate following January’s Federal Open Market Committee meeting. We agree with this view, and will be watching the changing of the guard from Janet Yellen to Jerome Powell closely for indications of future monetary policy direction.
We expect the Fed to implement ‘steady and gradual’ hikes on a quarterly basis throughout 2018. We believe there will be additional 25 basis points at each of the March, June, September and potentially December meetings.
These dates are the most probable trigger points given the meetings are accompanied by a ‘Summary of Economic Projections’ and press conference from Jerome Powell. The Fed’s mandate, to be increasingly transparent and articulate their economic stance to the market, will be more important than ever as this bull market moves into its tenth year.
The key factors that have driven the solid start to 2018 in global equity markets have arisen from US tax reform, corporate tax repatriation and a weakening US Dollar. The depreciation of the global reserve currency has driven significant upside across the commodities segment in particular. Major currencies like GBP, EUR, CNY and JPY have all appreciated between 4.5%-6%+ against the US Dollar since the FOMC’s last meeting. More monetary policy tightening is definitely on the cards.
No news or research content is a recommendation to deal. It is important to remember that the value of investments and the income from them can go down as well as up, so you could get back less than you invest. If you have any doubts about the suitability of any investment for your circumstances, you should contact your financial advisor.
It is important to remember that the value of investments can go down as well as up and it is possible to get back less than you invested, especially in the early years. Past performance is no guarantee of future returns and interest rates and dividends are variable and cannot be guaranteed in the future. Any tax treatment mentioned is based on personal circumstances and current legislation which is subject to change. In the event of a client having a complaint about our services we will do our best to resolve that complaint promptly and to the client's satisfaction. However if we are unable to do so, the client may have the right to complain to the Financial Ombudsman Service. Further information can be found on the Financial Ombudsman Services's Website at www.financial-ombudsman.org.uk.