Lower For Longer: Fed Reasserts Accommodative Stance On Interest Rates

On a special, blog-only edition of Market Week in Review, Chief Investment Strategist Erik Ristuben and Head of Portfolio & Business Consulting Sophie Antal Gilbert discussed the recent high-level talks between U.S. and Chinese diplomats and the potential impact on markets. They also recapped the Fed’s announcement from its latest policy meeting and provided an update on the rollout of vaccinations in Europe.

High-level talks between the U.S., China point to ongoing tensions

U.S. and Chinese government officials recently sparred during the first instance of high-level talks between the two countries since U.S. President Joe Biden took office, Ristuben said. “The acrimonious exchange between the world’s two largest economies is a confirmation of what markets had been expecting—that the fundamental tension points between the U.S. and China would not go away with the onboarding of a new U.S. administration,” he stated.

The March 18-19 meeting serves as a reminder that when conflicts emerge between the globe’s top two economies—a common occurrence throughout the course of history—they present exogenous risks that markets will have to factor in, Ristuben said. In most cases, these conflicts won’t have large impacts on overall performance, he noted, but on occasion, there will be issues that flare up and can potentially cause market disruption.

“In the case of the U.S. and China, there are several real, legitimate issues between the two nations, which is why I don’t see tensions fading anytime soon,” he remarked. While Ristuben expects China-U.S. relations to be a source of market risk and tension going forward, he doesn’t believe they’ll amount to enough of a problem to override the generally optimistic expectations for the U.S. economy over the next few years.

U.S. Federal Reserve reaffirms easy-money policies

Shifting to the U.S. Federal Reserve (the Fed)’s recent policy meeting, Ristuben said that the central bank made it very clear that it will make no changes to its ultra-accommodative monetary policy until the data warrants it.

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