GSBulletIn: FED “Relatively” Dovish

22 February 2018
FED “Relatively” Dovish Last night, stock markets initially rallied after the FED published the minutes of its last meeting. An hour later, however, markets fell by […]
 

FED “Relatively” Dovish

  • Last night, stock markets initially rallied after the FED published the minutes of its last meeting. An hour later, however, markets fell by more than two percent due to a minor (!) pick-up in treasury yields, spurring the kind of inflation fears which already ignited the sharp sell-off in February.
  • Markets (or was it algorithms?) seem to forget that the last FED meeting was held at the end of January, when US stock markets went parabolic, giving the FED even more reasons to take a more hawkish stance, such as indicating four instead of three rate hikes in 2018.
  • Put in the context of overheating stock markets when the meeting took place, we actually consider those FED minutes as “relatively” dovish … although it is true that we feel alone with that view, at least for now.
  • All we want to outline is that investors shouldn’t be too worried about last night’s (over-) reaction, and instead welcome those drops as opportunities to gradually increase their exposure to equities, especially in European stocks, which are barely up from a year ago.
 

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