U.S. fund managers made no significant changes to their model global portfolio this month, a Reuters poll found, as the world economic outlook remains gloomy and markets await a possible rate hike by the Federal Reserve in December.
U.S. consumer spending unexpectedly fell in August for the first time in seven months while inflation showed signs of accelerating, mixed signals that could keep the Federal Reserve cautious about raising interest rates.
As we have predicted for some time, central bankers are doubling down on the madness that has failed to achieve economic lift-off. It is no surprise to us that easy money has not stimulated growth. There was never any reason why it should. It reminds us of trying to force hay into the wrong end of an elephant.
The Fed has not followed through on their numerous promises of a rate increase that Fed Chair Janet Yellen and other Fed officials have made over the past several years. She spoke about purchasing assets of private companies and also mentioned that the Fed could modify its inflation target.
The Federal Reserve and Bank of Japan's actions last week have given a second wind to an alternative investment strategy that relies on cheap money and low market volatility to produce outsized returns. Risk parity trades, which involve borrowing to take long positions in both stocks and bonds, have been favored by some big hedge funds and other institutional investors starved for yield by eight years of record low global interest rates.
A top U.S. Federal Reserve official said on Thursday he supported the U.S. central bank's decision to leave interest rates unchanged at its policy meeting earlier this month until there was more evidence the economy is approaching the Fed's goal of full employment and 2% inflation.
The Federal Reserve can keep interest rates low for longer because even with jobs being created at a "pretty healthy clip" low rates are not creating inflationary pressures, a top Fed official said on Wednesday.
Dallas Federal Reserve President Robert Kaplan said on Monday he would have been comfortable with an interest rate increase at the Fed's policy meeting last week when the central bank chose to keep rates steady.