WeekWatch -‘US technology stocks dipped last week, after a better-than-anticipated jobs report reinforced expectations that the US Federal Reserve will increase interest rates this year’ Jan 22
US technology stocks dipped last week, after a better-than-anticipated jobs report reinforced expectations that the US Federal Reserve will increase interest rates this year.
Minutes from the central bank’s most recent meeting were released on Wednesday last week, revealing that officials are weighing up raising interest rates sooner than many investors were anticipating in order to deal with high levels of inflation. According to the minutes, some officials believe that rates ought to be raised before the Federal Reserve achieves its goal of hitting maximum employment in the US.
Since the COVID-19 pandemic caused economies around the world to shut down, central banks have kept asset prices stable with low interest rates and other forms of support (such as bond purchases).
However, with inflation now growing, many of them have begun moving to taper down this support – with the impact already being felt in some corners of the market such as in the share prices of technology companies.
Actions like the Federal Reserve’s upcoming interest rate hikes signal a shift in economic conditions after a period in which central banks have supported markets so extensively, wrote Mark Dowding of BlueBay Asset Management, a fund manager for St. James’s Place.
He added: “In many respects, 2022 begins with a sense of optimism after two years of pandemic. As normality returns, we are inclined to think that fundamentals and valuations will play a more important role in determining the path of asset prices than they have during a period characterised by abundant liquidity and market technicals.”
Media reports over the weekend suggested that the UK is moving towards ‘living with’ COVID-19 due to indications that the Omicron variant is less severe than previous ones.
With so much uncertainty, the best course of action for investors is to take a long-term view with a well-balanced range of investments. If your funds are invested in a wide range of assets, then their performance won’t be overly reliant on any one outcome.
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