Fund managers are hiding out in safe havens, hoping the Fed changes course much sooner than the market thinks. That may be a forlorn hope.
A jump is certain, but the magnitude remains a mystery. Will it be 50 basis points, as had been widely expected until last Friday night’s ugly US inflation number? Will it be 75 basis points, as most of the market now expects? Or is, as JPMorgan has suggested, a 100-basis-point rise an outside chance?
“Wall Street sentiment is dire, but no big low in stocks before a big high in yields and inflation,” Hartnett says.It’s an important point that investors should remind themselves of regularly. This pain is occurring at the very start of the Fed’s raising cycle, not the end. The big high in bond yields and inflation is still to come.
Fund managers are even telling company chief executives to play it safe, with the majority telling CEOs to prioritise balance sheet strength over capital spending and even shareholder returns.
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