Inflation in the US is likely to come back slowly, keeping the Fed from raising interest rates for an extended period.
Over the next couple of years, prices are likely to increase to the 2.3% to 2.4% level, as the Fed has learned its lesson from past interest rate increases and will not risk another market “tantrum,” according to the CEO of Pacific Investment Management Co.
“The days of inflation we remember are gone,” Mr. Roman said. “We do not think the Fed is going to raise rates for a very long time.”
Led by the Fed, peer central banks have been cutting interest rates and buying securities to combat the effects of the C-19 coronavirus chaos, an intervention that helped stabilize global markets.
Even as US unemployment soared to its highest marks in decades, stock markets have recovered most of their recent losses and corporate debt investors have poured money into junk bonds.
“You can make the argument that the signaling is actually more important than the actual amount that they buy,” Mr. Roman said of the Fed’s intervention.
US equities rose to 2-wk highs Tuesday on a report that President Trump supports sending another round of checks to Americans and data that showed manufacturing is nearing expansion.
Pimco has about $1.8-T in mostly fixed-income assets under management, is raising at least $6-B for distressed credit and other corporate debt opportunities to take advantage of dislocations driven by The China Virus chaos.
It is also looking to return as an originator of collateralized loan obligations for the 1st time since Y 2006, eyeing prospects for charging higher interest rates and stricter underwriting standards than pre-virus issues.
He also noted that the housing and technology sectors are strong, but that it is harder to tell about the recovery for retail, leisure, gaming and Oil & Gas.
Tuesday, the major US stock market indexes finished at: DJIA +131.14 at 26156.12, NAS Comp +74.89 at 10131.37, S&P 500 +13.43 at 3131.16
Volume: Trade on the NYSE came in at 1.0-B/shares exchanged
- NAS Comp +12.9% YTD
- S&P 500 -3.1% YTD
- DJIA -8.4% YTD
- Russell 2000 -13.7% YTD
HeffX-LTN’s overall technical outlook for the US major stock market indexes is Bullish with a Very Bullish bias.
Looking Ahead: Investors will receive the FHFA Housing Price Index for June and the weekly MBA Mortgage Applications Index Wednesday
Have a healthy day, Keep the Faith!