Stocks gained strength after Fed Chairman Jerome Powell reiterated the central bank’s commitment to provide aid to the economy “for as long as it takes.” The central bank sharply upgraded its 2021 GDP growth forecast to 6.5% and also said it expected unemployment to drop. Fed Chair Jerome Powell added that inflation was forecast to reach 2.4% this year, but called it a temporary surge. Some are wondering if the Fed is so confident in the outlook, why not raise rates sooner?
Volatility remains high but it is largely caused by rotation from tech stocks to value. Hedge funds in particular, are the ones causing much of the volatility ‘coz if they want to buy the banks or value stocks, they need to sell tech stocks to free up money. Hence the unprecedented volatility.
Higher growth and higher inflation is now the consensus. How should investors tailor their portfolios?
Future Wealth’s View
While much of the news seems to be on the Fed, interest rates and creeping inflation, it is important to not lose sight of the reopening of US Corporations. Many entertainment venues that were shut down more than a year are starting to show signs of life as companies continue to make reopening announcements. The theme can be clearly seen in financial markets, where the cyclical trade has been on fire. Disneyland and AMC are the two who announced reopening this week, bringing back normalcy slowly but surely. Corporations are not the only ones experiencing a windfall from the reopening. Commercial real estate, mom and pop restaurants, local travel agencies and everyone involved in the entertainment business are going to benefit. It is going to be a reversal like never seen before.