Once again, markets will pay close attention to signals from the US Federal Reserve’s Open Market Committee, which meets this week.
Coming on the heels of a dramatic two-month rollercoaster – as the S&P 500 fell 6 per cent between May 21 and June 24 before recovering to finish last week near its record high – the scope for misinterpretation is far from trivial. So here are seven points investors may wish to keep in mind as they navigate yet another fluid policy phase.
The Fed has no choice but to operate through financial markets to achieve its mandated economic objectives. The central bank’s exceptional support of markets is a means to an end, and not an end in itself. And in a world where polarised politics sideline most other policy making entities, higher asset prices are virtually the only mechanism available to promote growth and jobs.