United States
Hawkish Fed in 2022: Boosting the Importance of Stock Picking as Valuations Receive Less Support
Cross Asset Strategy280 Views, 08 Jan 2022 03:30
EXECUTIVE SUMMARY
- Fed Chair Powell eyes March to raise the federal funds rate, but pressure to delay has risen. The Fed is keen not to fall behind the inflation curve in 2022.
- Inflation forecasts could be critical in determining whether Fed policy guidance requires further hawkish adjustment. Labour market developments will, however, not be entirely overlooked in terms of adjusting policy settings.
- Fed policy lowered the equity risk premium and boosted equity valuations. Lack of Fed intervention in US Treasuries means outsized US equity portfolio gains will depend on stock picking.