Investors were quick to buy stocks that could benefit from faster inflation, betting that an extremely easy monetary-fiscal policy և combination of the world economy, which would break the Covid-19 blockade, would push up prices.
However, after an unexpected rise in inflation data in recent months, the Fed earlier this week gave its guidance on when this is possible. start raising interest rates,: announced that it will soon begin discussing when it will cut $ 120 billion in monthly bonds.
In: the axis of the unexpected central bank It has thwarted the most popular inflationary trade, such as lower stocks, gold and commodity prices, and taken away other activities that have recently weakened.
“On Wednesday, the unexpected shift from the Federal Bank on the basis of risk management reacted in the world markets. “Asset markets have changed dramatically, investors have overcome inflation barriers, and deflationary transactions have faded,” said Krishna Guhan, vice president of Evercore ISI. ,
Guhan said the break-up of the deflationary trade would make it difficult to draw firm conclusions about the Fed’s shift in market views as they could boost market momentum, but said investors could begin to question the central bank’s commitment to its new, more flexible inflation targeting regime.
Natural resources were hit hardest by the deflationary trade. The Bloomberg Commodity Price Index fell 3.6 percent on Thursday, the biggest drop in more than a year as WTI fell 1.5 percent.
The so-called USA securities – often cheaper, unfavorable companies that are more sensitive to economic growth – fell by 1.3% on Thursday to extend the initial decline suffered on Wednesday, the day of the Fed announcement. On Thursday, the MSCI World Values Index fell by 1.2%.
The Russell 2000 Index of Small US Companies fell 1.1 percent, the biggest change in a month, and the price of gold fell to a two-month low of $ 1,773 on Thursday, slightly lowering the decline until Friday.
Other assets, however, won. The Federal Reserve’s fading chances of inflation getting out of control helped boost long-term US Treasury and other securities benefiting from deflationary pressures, such as Highly rated corporate bondsthat: USD և Very large technology stocks.
Matthew Hornbach, head of global macroeconomic strategy at Morgan Stanley, said the Fed was even risking another “shock” in the wake of the stock market crash in May 2013. The impetus for the crisis.
“Contrast risk has increased,” Hornbach wrote in his post. “The hawk’s shift is coming in. “The assessment of the relevant policy raises legitimate questions about the rate of contraction, the rate of growth after that.”