Market Update (Article)

Market Update for September 18, 2020

Fed looks to foster full employment and spur inflation toward long-term target

 

On Wednesday, September 16, 2020, the Federal Reserve convened and announced its intent to keep short-term interest rates, as measured by the “Fed Funds rate,” in the range of 0% to 0.25% for an extended period of time.  Expectations are that these low rates are here to stay until at least 2023 which the Fed maintains supports its dual mandate to foster full employment and spur inflation toward a long-term target of 2%.

This is no doubt welcome news for consumers who immediately benefit as cheaper financing naturally leads to increased buying power.  However, those looking for sources of income from bonds will need to tweak strategies once again. Just when rates were on the move higher, they quickly turned lower, therefore reducing income from high quality bonds like U.S. Treasuries.

Lower interest rates and a commitment by the Fed to keep loose monetary policy in place points to further expansion in economic growth in the near-term.  Though there are coronavirus hotspots around the world, progress on both therapeutics and vaccines continues to solidify re-opening plans across with the United States.  Trends in the labor market also continue to show progress as from April to the end of August the unemployment rate has fallen from 14.7% to 8.4%.

With this in mind, we continue to recommend investors maintain a slightly overweight exposure to global equities, with the U.S. and emerging markets looking the most attractive.

 

The summary/prices/quotes/statistics contained herein have been obtained from sources believed reliable but are not necessarily complete and cannot be guaranteed.  Past performance results are not necessarily indicative of future results.