From the Wall Street Journal’s “Dow on Track for Worst Week Since January” posted early Friday:
Investors have gained some confidence that the Federal Reserve will act to curb rising inflation after policy makers signaled Wednesday that they expect to raise interest rates by late 2023. That has started to take the steam out of a recent rally in stocks linked to a broad economic recovery, leading to a retreat in banking and energy shares this week. It is also reviving appetite for technology stocks and other assets that could benefit from lower inflation and higher rates.
“If the Fed tapers bond purchases and it raises rates, then all of a sudden the inflation dragon gets tamed,” said Gregory Perdon, co-chief investment officer at private bankArbuthnot Latham. “If inflation gets tamed, you want to buy the long-duration assets,” or investments that are sensitive to interest rates, he added.
In the near term, Mr. Perdon expects inflation to creep higher, due to supply-chain bottlenecks, chip shortages, strong demand for goods and services and easing pandemic restrictions. Stocks are still likely to advance, he said.
“The Fed hasn’t done anything yet. All they’ve done is signal, and they’re a long way off from doing anything,” Mr. Perdon said. “Markets are supported by the trifecta of monetary and fiscal policy and the vaccine rollout. Markets may face a reckoning, but that won’t happen in 2021.”
My take: Meanwhile, bucking the rest of the market, Apple could make it three green weeks in a row.