Market Commentary: The most highly anticipated FOMC meeting in recent memory is now in the history books. Choosing to sacrifice the threat of inflation over market liquidity concerns, the Fed lowered both the Federal Funds Rate and Discount Rate by 50bps. This appeared to be what the market was looking for, and perhaps even more. Equity markets responded positively around the globe.
Although the Fed has lowered interest rates, the yield on the 10-year Treasury has climbed significantly the past eight trading days from 4.32% to more than 4.52%. The new level is slightly higher than the 4.49% level that prevailed prior to yesterday’s announcement. So far, the interest rate reduction has not filtered through to intermediate and long-term government securities, but don’t tell that to equity investors.
Sectors: All sectors received a boost this week with the most depressed (Financials and Consumer Discretionary) receiving some of the biggest bounces. The change in the environment has helped these groups, but the rate cut is an acknowledgment that these sectors are in trouble. Lower interest rates may also provide additional weakness for the US dollar and carries inflationary concerns. These factors help improve the outlook for the Materials sector, which has jumped back into the number two slot in our sector rankings.
Although the Fed has lowered interest rates, the yield on the 10-year Treasury has climbed significantly the past eight trading days from 4.32% to more than 4.52%. The new level is slightly higher than the 4.49% level that prevailed prior to yesterday’s announcement. So far, the interest rate reduction has not filtered through to intermediate and long-term government securities, but don’t tell that to equity investors.
Sectors: All sectors received a boost this week with the most depressed (Financials and Consumer Discretionary) receiving some of the biggest bounces. The change in the environment has helped these groups, but the rate cut is an acknowledgment that these sectors are in trouble. Lower interest rates may also provide additional weakness for the US dollar and carries inflationary concerns. These factors help improve the outlook for the Materials sector, which has jumped back into the number two slot in our sector rankings.
Styles: The various investment styles are virtually unchanged from a relative ranking this week, but they all improved their absolute standing considerably. Mega Cap and Large Cap Growth remain the favorites while Micro Caps and Small Cap Value trail the field.
International: What’s good for the US is great for the world, or so it seems. Most of the globe got a good pop this week. The notable exception is Japan, which is mired in its own problems.
International: What’s good for the US is great for the world, or so it seems. Most of the globe got a good pop this week. The notable exception is Japan, which is mired in its own problems.
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