US: Strong growth and accommodative monetary policy to supports equities – JP Morgan
|At the June meeting, the Federal Open Market Committee (FOMC) signaled a more hawkish stance towards its monetary policy outlook driven by materially stronger growth and inflation outlook in the medium-term. Economists at JP Morgan continue to expect yields will grind higher through the end of the year and strong economic growth accompanied by still relatively accommodative monetary policy will provide support to equity markets.
Committee’s optimistic view should prompt a reduction in asset purchases next year, followed by rate hikes in 2023
“The statement and committee projections reflect the committee’s view that fiscal support and continued vaccination efforts will provide a strong boost to growth and strengthen the recovery in the labor market, while potentially causing more persistently higher inflation than originally forecasted.”
“The median dot plot now reflects two rate hikes sometime in 2023, up from no rate hikes just three months ago. Moreover, 7 of 18 members believe a rate hike might be appropriate sometime in 2022, up from four in March. While Chairman Powell suggested the median dot plot should not be viewed as a definitive path forward to short-term rates, it’s clear the committee has shifted to a more hawkish stance, reflecting its more optimistic outlook on the economy.”
“Interestingly, when asked about the timing of the reduction in asset purchases, Chairman Powell shied away from providing new details but did say the committee was discussing tapering. Indeed, taking the committee’s interest rate forecast and economic projections together, it seems tapering would be appropriate in 2022, especially given rate hikes are now expected in 2023. We now expect the committee will lay out its tapering plans at the September meeting.”
“We continue to expect yields will grind higher through the end of the year and strong economic growth accompanied by still relatively accommodative monetary policy will provide support to equity markets.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.