The stock closed in a mixed week after an initial surge on Friday, following Treasury Secretary Janet Yellen’s request for a major stimulus package to help accelerate the economic recovery.
Four experts discuss what their comments mean to the markets and how to invest while the pandemic continues.
Jim Stewart, a columnist for The New York Times, says the benefits of overspending far outweigh the risk.
“The question is whether there is a greater risk of excessive spending than insufficient spending? It is quite clear. I mean, what is the risk of a very large stimulus? Perhaps higher interest rates in the future, perhaps a little inflation, but as Yellen pointed out, we have the tools to deal with it. The risk of underutilizing is more and more unemployment, a downward spiral in the economy, possibly a recession. This is much more difficult to get out of, so I think her point about risk is quite indisputable … Of course this is very good for the stock market. I mean, just look at the current levels, which I think are largely anticipating this significant stimulus. This is very optimistic and, ironically, people who have actions and are benefiting from these tend to be those who have not been so affected by the pandemic. Specific elements that aim to help people affected by the pandemic, I think it is a very direct instrument. It is not very suitable for helping These people in particular, and I think this is something that has upset some of the critics, but nevertheless, if what you’re trying to do is keep the economy thriving, you know it won’t be perfect. “
Liz Young, director of market strategy at BNY Mellon Investment Management, welcomes the increase in rates.
“The real question here is whether rates are going up and why are they going up? And I think so, they should be going up, and they are going up because the economy is expanding, we expect more expansion later in the year, we expect a big improvement in corporate data and a little inflation. Inflation continues to have a bad reputation. Inflation means that there is healthy demand in the economy, so I welcome the rate hike. And the question of what is the breaking point when it matters to the market, I don’t know what the magic number is, I don’t know if there is a magic number about the mental limit of when it will actually turn to decrease. I think it has more to do with the speed with which we got there. gradually the rates over the year, I think everything is fine and we can digest that, so I’m fine with this rate increase. I think there will be volatility in the Treasury curve in 2021. I would lean towards this volatility and use it as an opportunity purchase if it causes a drop in shares. “
Katerina Simonetti, senior vice president at Morgan Stanley Private Wealth Management, looks at how changing consumer behavior can impact markets.
“The market has been strongly supported. It is strong. The profit season has brought some big surprises. And I think we are definitely adhering to the philosophy of reopening and staying behind the cyclical names and the history of the reopening and repositioning our portfolios to reflect what will come in this post-vaccine, post-Covid era, which is really exciting, but having said that, I think consumers have developed some really powerful habits over the past nine months and names that stay at home should definitely not be discarded. a place for them in the portfolio. And, you know, we’re certainly paying attention and owning them. “
George Cipolloni, portfolio manager at Penn Mutual Asset Management, looks at how the Federal Reserve’s policy has shaped investor behavior.
“When you think about the Fed’s impact, they had two main impacts here – they kept interest rates low, which raised asset prices. And secondly, they have stimulated a certain behavior in the market where people tend to be a little more irresponsible. And we saw that through certain examples of specific actions like GameStop. … This is the behavior that is being conducted through the action of the Fed, so this is something to be cautious about. I think this reflection negotiation is important. We are investors in income, so you are seeing a dramatic impact on the bond market today and I think it is something else that is very, very important to keep an eye on. “
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