01 Feb

Fed’s hawkish tones and rate rises will become less relevant

February 1, 2023

By George Prior

Investors are set to largely shrug off hawkish tones and rate rises from the Federal Reserve moving forward, predicts the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The prediction from Nigel Green of deVere Group, comes as the U.S. central bank’s policy-setting Federal Open Market Committee (FOMC) raised rates by 25 basis points at the conclusion of its two-day meeting, bringing its benchmark to a target range of 4.5% to 4.75%.

The deVere Group CEO observes: “The markets expected a 25bps rise, which is another step downward for the Fed, which increased rates by 50 basis points in December, following four 75 basis-point hikes in 2022.

“The Fed went strong on flagging worries about financial conditions becoming too loose, and that whilst progress on taming inflation has been made, officials remain concerned.

“The central bank delivered hawkish tones about rates having to remain higher for longer and reiterated the Fed’s commitment to cooling inflation.”

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However, says Nigel Green, “There’s set to be some fluctuation, but moving forward markets are going to largely shrug off the Fed’s hawkish tones and rate rises.”

He continues: “Markets typically look to the future, not at the present, and will see that inflation has peaked, and the growing signs of a ‘soft landing’ for the U.S. economy as it appears that the central bank is reducing inflation without creating significant unemployment.

“There’s a sense that things are actually better than the Fed is admitting to, in order to stop over-exuberance of the markets.

“The Fed’s rhetoric doesn’t appear to be changing, despite the data, and the markets are aware of this.”

As the U.S. central bank steps down from the aggressive tightening agenda, markets are increasingly “going to overlook the Fed’s rate increases; they’re becoming less relevant.”

Nigel Green affirms: “Savvy investors know that now – in a year in which there will be big winners and big losers – it’s about being invested in the right companies, those which can consistently maintain or steadily grow margin, as well as diversification across sectors, asset classes and regions.

“A good fund manager will be critical in identifying these winners and losers as the economic cycle moves on.”

About the Author:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

 


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