Wednesday, 16 May 2018

Quickened pace of Fed rate hikes could leave investors with “nowhere to run to”

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.7 percent and the Nikkei 225 fell 0.2 percent. The STOXX Europe 600 rose 0.1 percent.

“Fundamentals aren’t improving enough to justify valuations, and when one considers that with the backdrop of a Fed that’s raising interest rates, the market will start re-rating its risk profile,” said Stephen Wood, chief market strategist for Russell Investments.

Mark DeCambre at MarketWatch noted that there was “nearly nowhere to run or hide to for investors on Tuesday” as US Treasuries and gold also fell.

DeCambre said that some market participants are seeing “a quickened pace of moves by the Federal Reserve to raise interest rates”.

Ryan Vlastelica at MarketWatch quoted Morgan Stanley as saying: “Decelerating growth, rising inflation and tightening policy leave us with below-consensus 12-month return forecasts for most risk assets. After nine years of markets outperforming the real economy, we think the opposite now applies as policy tightens.”

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