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Thursday 05 May 2022
May 2022 | Fed Chair Powell stated the need for a 50bp rate hike at the next couple of meetings. Powell's comments on rate hikes suggest the Fed remains comfortable with market pricing at this point, and will be even more data-dependent going forward. While there was little reaction in the financial markets following the release of the FOMC statement, after the press conference, which was not as hawkish as market expectations, there was a strong rally in risk assets.
01 | On 4 May, the Federal Reserve (Fed) hiked the Fed funds rate by 50bp to 0.75-1.00%, the first back-to-back hike since the second quarter of 2006.
02 | Chair Jerome Powell stated the need for a 50bp rate hike at the next couple of meetings.
03 | After the press conference, which was not as hawkish as market expectations, there was a sharp drop in the two-year Treasury yield and a steepening yield curve. Equity markets rallied sharply.
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of May 5, 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.
At the core of the crisis, Russian assets have become almost un-investible, with dramatic price action as the market attempts to grapple with uncertainty.
President Macron is leading in the polls, but an upset victory by Le Pen would significantly change policy in France. Markets are currently complacent in anticipation of a Macron victory, but a tightening race will command some degree of market volatility in the coming weeks, adding to a complex landscape in Europe. The prospect of a European recession is another key issue, and our tactical view is that US equities are in better shape than European ones. This has nothing to do with the French election, but with the broader macroeconomic and geopolitical situation, as Europe has been hardest hit by the conflict in Ukraine.
The US economy has proven to be exceptionally resilient in the current context. We’ve witnessed strong GDP growth in the fourth quarter, mainly stemming from inventory accumulation, with consumption running a little weaker. Overall, the inflation environment is more difficult today than it has been for the past 15-20 years. Supply constraint issues will take far longer to resolve given the conflict in Europe and due to the shortages in commodities and energy in particular. We can expect inflation to return to more reasonable levels in the next 12-18 months.
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Securities offered through Amundi Distributor US, Inc.
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Underwriter of Pioneer mutual funds, Member SIPC.