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Markets look beyond Fed minutes


May 22, 2024 ( Newswire) Wall Street's bull run has carried all three major indexes to record highs this month and will continue regardless of the tone of the Federal Reserve minutes, predicts the CEO of one of the world's largest independent financial advisory and asset management organizations.

The bullish prediction from Nigel Green comes as investors await minutes from the US central bank's latest policy meeting for signals on the timing of a rate cut.

Several officials have stressed in recent days the need to wait for further indications of easing inflation before cutting rates.

He says: "More hawkish? More dovish? The tone of the Fed minutes is becoming less important to many investors now.

"We expect the markets' bull run which has taken Wall Street's major indexes to fresh highs in recent weeks to continue."

The deVere CEO says there are two main narratives for this.

"First, a strong earnings season and so-called soft landing for the US economy.

"This robust performance serves as the backbone of confidence, instilling trust among investors in the stability and strength of the world's largest economy.

"At the same time, signs of a rebound in China, the world's second-largest economy, and Europe beginning to shine, further adds buoyancy to the global economic outlook."

He continues: "The second narrative supporting the expectation of a continued stock market rally revolves around the anticipation of interest rate cuts should there be an economic slowdown.

"Should this happen, the Fed would cut rates in response, and in turn, this would also be expected to bolster equities."

The markets' hopes for rate cuts dominate financial news and investor sentiment, but such expectations shouldn't overshadow more critical aspects of investing.

Investors should remain keenly attuned to the tone of Federal Reserve officials and focus steadfastly on companies' core fundamentals.

"Focusing on companies' fundamentals remains paramount. The fundamentals - earnings growth, revenue trends, profit margins, debt levels, and cash flow - offer a clear picture of a firm's health and long-term viability.

"These metrics are critical for assessing the intrinsic value, irrespective of macroeconomic policy shifts."

In addition, such fundamentals provide a buffer against market volatility driven by speculative hopes for rate cuts.

When investors ground their decisions in solid financial data, they are less susceptible to the whims of market sentiment. This disciplined approach helps in building a resilient portfolio that can endure short-term market gyrations and align with long-term investment goals.

Nigel Green concludes: "The Fed minutes will make little material difference to current market sentiment as the optimism continues."

t: +44 207 1220 925
Twitter: @PriorConsults

deVere Group is one of the world's largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of offices around the world, over 80,000 clients and $12bn under advisement.

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