High Interest Rates Here To Stay? Fed Minutes Reveal Disinflation Takes 'Longer Than Previously Thought'
Portfolio Pulse from Piero Cingari
The latest Federal Open Market Committee (FOMC) minutes reveal that the disinflation process is expected to take longer than previously thought, leading to the likelihood of maintaining high interest rates for an extended period. This has resulted in cautious market reactions, with slight increases in Treasury yields and a stronger U.S. dollar, while major stock indices and ETFs experienced losses.
May 22, 2024 | 6:22 pm
News sentiment analysis
Sort by:
Ascending
NEGATIVE IMPACT
The iShares Russell 2000 ETF (NYSE:IWM) underperformed, down 0.5%, as small caps reacted negatively to the FOMC minutes.
Small-cap stocks, tracked by IWM, underperformed as the FOMC minutes indicated prolonged high interest rates, which can be more detrimental to smaller companies with higher debt levels.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
The Invesco QQQ Trust (NASDAQ:QQQ) was down 0.2% as the tech-heavy Nasdaq 100 index reacted to the FOMC minutes.
The tech-heavy Nasdaq 100, tracked by QQQ, saw a decline as the FOMC minutes suggested a longer period of high interest rates, which can negatively impact growth stocks.
CONFIDENCE 85
IMPORTANCE 75
RELEVANCE 85
NEGATIVE IMPACT
The SPDR S&P 500 ETF Trust (NYSE:SPY) was down 0.4% as risk sentiment turned more cautious following the FOMC minutes.
The cautious tone of the FOMC minutes led to a decline in the SPY ETF as investors reacted to the prospect of prolonged high interest rates.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90
POSITIVE IMPACT
The U.S. dollar index, tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), slightly strengthened by 0.2% following the FOMC minutes.
The FOMC minutes indicated a prolonged period of high interest rates, which typically strengthens the U.S. dollar. This led to a 0.2% increase in the U.S. dollar index tracked by UUP.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80