4 Mutual Funds To Tap U.S. Equity Market Optimism

The American financial market has witnessed a rebound in stock price performances since December on the back of a number of macroeconomic tailwinds. Fed’s decision to leave rates unchanged this year and investor optimism over an imminent closure to U.S.-China trade negotiations in the near future boosted investments.

The broader equity market’s performance in recent weeks and the aforementioned factors make it ideal for investors to put capital in U.S. equity mutual funds at present.

Fed’s No-Rate-Rise Scenario Appears Encouraging

The Federal Reserve’s decision in its January meeting to leave its benchmark interest rate unchanged in 2019 came as a huge relief for U.S. equity markets. The current Fed rates of 2.25-2.50% are likely to remain in place.

The Fed’s patient approach to raising rates is attributed to checked core inflation, its primary inflation measuring gauge, which is expected to remain unperturbed despite the strong labor market. The Core Personal Consumption Expenditures index (which excludes food and energy), remained unchanged in December at 1.9%, below the Fed’s long-term inflation target of 2%.

The current no-rate-rise scenario is good for businesses because it will keep the rate of borrowing steady in the near future. This would, in turn, boost the companies’ earnings. As companies register growth in earnings, stock price performances could improve further, making it ideal for investments in equities and equity funds. 

A U.S.-China Trade Deal Could Drive Markets Higher

A nearing resolution to the ongoing trade war between the world’s two largest economies is one of the major driving factors behind the renewed buying interest in investors.

According to a Bloomberg report, U.S. officials are reportedly preparing a 150-page trade agreement that President Donald Trump and the Chinese president Xi Jinping could sign during their summit in Florida this month. In addition, this week’s reports of China offering to lower tariffs on American auto, farm, chemical, and other goods as part of the trade deal also affected market sentiment, inducing optimism over a favorable trade agreement.

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