Stocks Settle As Powell Signals Continuation of Easing

Stocks Settle As Powell Signals Continuation of Easing

Stocks saw a decline today, marking the 5th consecutive session of losses, as investors and traders took advantage of high valuations to lock in profits.

Stocks Will Continue to Live in an Accommodative Environment

The market has been buoyed by cheap money, with the U.S. Federal Reserve purchasing $120 billion in bonds each month and fiscal policy pumping $1 trillion into the economy. The global lockdowns have also meant that many individuals are saving, adding to the influx of liquidity that has propped up asset prices. This favorable environment is expected to persist for the foreseeable future.

Jerome Powell’s Continued Easing Stance

Federal Reserve Chairman Jerome Powell reassured the market by signaling that monetary policy would remain loose and the bond buyback program would continue. He expressed confidence in a strong economic recovery for the U.S. in 2021.

When asked whether the rise in Treasury yields signals an improving economy, Powell responded, “In a way, it’s a statement of confidence on the part of the market that we will have a robust and ultimately complete recovery.” This suggests that the Fed is optimistic about the U.S. recovery, though it may also indicate a potential shift in policies down the road.

Caution Amid Optimism

Despite the Fed’s optimistic outlook, some analysts remain cautious. Steve Friedman, senior macroeconomist at MacKay Shields, cautioned, “We’re not out of the woods yet when it comes to the virus, and the economy also remains quite far from a full recovery.”

This more reserved perspective highlights that while there’s confidence in the recovery, the road ahead may still have significant challenges.