The hawkish pivot by the Federal Reserve combined with uber-bullish sentiment among stock investors has caused risk appetite to be “suddenly twitchy,” according to Bank of America Corp. strategist Michael Hartnett.
Andrew Brenner of NatAlliance Securities says the U.S. fed chose the most 'hawkish' move in reducing interest rates for the last month of 2024.
The S&P 500 is headed for the worst week in more than three months after the US central bank said inflation concerns are back in focus, signaling fewer interest-rate cuts than anticipated next year. Before the Fed meeting, allocations to US equities had surged to a record and cash holdings had fallen so low that they triggered a sell signal for stocks, according to BofA’s monthly fund managers survey published earlier this week.
Hartnett said an exchange-traded fund tracking US banking stocks, the SPDR S&P Bank ETF, needs to hold near 2022 highs to prevent investor sentiment from souring ahead of President-elect Donald Trump’s inauguration on Jan. 20. The strategist has previously said investors should start putting more money into stocks outside the US, like China and Europe, before Trump takes office.
Optimism driven by a resilient American economy, artificial intelligence developments and falling rates has lifted stocks, but there are now doubts about whether the rally can run further after the Fed’s hawkish tone earlier this week.
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