The shares closed a mixed week after initially rising to Finance Minister Janet Yellen on Friday for a major stimulus package to accelerate the economic recovery.
Four experts discuss what her comments mean for markets and how to invest as the pandemic continues.
Jim Stewart, columnist for The New York Times, says the benefits of overspending outweigh the risks.
“The question is whether there is a greater risk of overspending than in underspending? That’s pretty clear. I mean, what’s the risk of too much stimulus? Maybe higher interest rates along the way, maybe a little inflation, but as Yellen pointed out, we have the tools to deal with it.The risk of underspending is further and greater unemployment, a downward spiral in the economy, possibly a recession.It’s much harder to get out, so I think her point about the risk is pretty indisputable … This is obviously very good for the stock market. I mean, just look at the current levels, which I think are largely expected to expect this significant stimulus. It’s very positive, and Ironically, the people who own stocks and who benefit from them are usually the ones who are not so much hurt by the pandemic. Specific elements aimed at helping people who are hurt by the pandemic, I think it is’ a very blunt in instrument. It’s not very adapted to help those specific people, and I think that at is something that has bothered some critics about it, but if you want to make the economy thrive, you know that it’s not going to be perfect. ‘
Liz Young, director of marketing strategy at BNY Mellon Investment Management, welcomes the rise in rates.
“The real question here is if rates should rise and why should they rise? And I think yes, they should rise, and they will rise as the economy expands, we expect that later in the year we expect a big improvement in corporate data, and we expect some inflation.Inflation is still getting bad.Inflation means there is a healthy demand in the economy, so I welcome the rise in rates.And the question of what the breaking point is, when does it matter for the market, I do not know what the magic number is, I do not know that there is a magic number about the mental threshold when it’s actually going to turn I think it’s more about the speed at which we get there. rates are rising, I think it’s good and we can digest it, so it’s good with my rate hike.in 2021 there will be volatility in the treasury curve.I would lean in the volatility and use it as a buying opportunity if it’s a caused a decline in shares. ‘
Katerina Simonetti, senior vice president at Morgan Stanley Private Wealth Management, looks ahead to how changing consumer behaviors can affect markets.
“The market has been strongly supported. It is strong. The earnings season has produced great surprises. And I think we are definitely going on board with the reopening philosophy and behind the cyclical names and behind the story of the reopening and by repositioning our portfolios to reflecting what’s going to come after the vaccine, after the Covid, in the era, which is very exciting, but having said that, I think consumers have developed very powerful habits over the last nine months and home names should definitely not be discounted. a place for them in the portfolio. And you know, we definitely pay attention to it and own it. “
George Cipolloni, portfolio manager at Penn Mutual Asset Management, looks at how Federal Reserve policy has shaped investor behavior.
“If you think about the impact of the Fed, they had two big impacts here – they kept interest rates low, which caused asset prices to rise. And number two, it stimulated a certain behavior in the market where people are inclined. to be a little more irresponsible.And we saw through certain examples of specific stocks like GameStop … This is behavior led by the Fed action, so it’s something to be careful about. And then just go “I think it’s important with this reflection trade. We’re income investors, so you see a dramatic impact on the bond market today, and I think it’s another thing that’s very, very important to keep an eye on.”
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