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Fed Holds Rates at Near Zero, Investors to Top-Up Portfolios

Fed Holds Rates at Near Zero, Investors to Top-Up Portfolios
(Kenneth Mellott/Dreamstime)

By Thursday, 11 June 2020 07:00 AM Current | Bio | Archive

Investors will likely be seeking to top-up their portfolios following the Federal Reserve’s meeting on Wednesday.

At the first meeting of the year, and the first since the coronavirus crisis brought the global economy to a virtual standstill, the Fed announced plans to hold interest rates at near-zero to help revive the U.S. economy.

It was widely predicted that interest rates would remain the same, and the Federal Reserve’s decision was unanimous.

However, the main focus switched to Chairman Jerome Powell’s subsequent statement.

Powell said in a press conference that the COVID-19 pandemic “weighs heavily” on the U.S. economy, and the Fed would do “whatever we can, and for as long as it takes” to support the recovery and “limit lasting damage” to the economy.

As such, we can expect additional stimulus from the Fed, maybe from Congress too, in the not too distance future, as the economic revival will be a far longer process than many had envisaged.

This ‘backstop’ from the Federal Reserve reduces the threat of a second market slump, even if economic data worsens in the next quarter.

Indeed, it offers a ‘floor’ for equities.

Consequently, investors will be looking to top-up their investment portfolios further to get ahead at lower entry points, before the rise in values that would come into effect with another round of stimulus.

Nevertheless, although many believe the stock markets have appeared to be out of sync with the recent gloomy economic data, it could be they are giving us clear indications of the current and future shape of the economy, where we’ll see clear-cut winners and losers, unlike in previous recessions.

As such, a good fund manager will assist investors to make the most of the opportunities and sidestep potential risks as and when they arise, to create and accumulate wealth.

The Federal Reserve believes there’s a tough road ahead for the remainder of the year in terms of the economic outlook. However, it will still continue to buy government-backed debt “at least at the current pace”, and the markets believe this will increase further to maintain an efficient function of the markets.

This will, in turn, support and likely provide a boost to asset prices in the future. Investors will therefore now be seeking out the opportunities before any fresh or enhanced stimulus packages are unveiled.

Nigel Green is founder and CEO of deVere Group. One of the world’s largest independent financial advisory organizations, de Vere does business in 100 countries and has more than $12 billion under advisement.

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Investors will likely be seeking to top-up their portfolios following the Federal Reserve’s meeting on Wednesday.
fed, rates, near, zero, investors, portfolios
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2020-00-11
Thursday, 11 June 2020 07:00 AM
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