American investors are increasingly fleeing to safer assets again after dampened inflation expectations – ‘it was a wake-up call.’
That’s according to Doug Fincher, portfolio manager at Ionic Capital Management and co-portfolio manager for an inflation-protected exchange-traded fund, speaking to news agency Reuters about the latest month’s inflation statistics and other macroeconomic figures in the US.
US investors have once again changed course in their view that the Federal Reserve should start slowing the pace of its interest rate hikes.
Now, they are positioning themselves based on the risk of continued high inflation and rate hikes again and are calculating that the central bank may raise rates to 6 percent or more.
US investors are again attracted to safe-haven assets like government bonds
Risk assets such as stocks and corporate bonds are now taking a back seat to increased interest in government bonds or cash, which are described as “safer assets”.
Later on Tuesday, Fed Chairman Jerome Powell will speak to Congress.
For understandable reasons, Wall Street is paying close attention to what Powell has to say about interest rates going forward.
The Fed will decide on the US interest rate level at its next monetary policy meeting in two weeks, March 21-22. According to Reuters, the majority of traders expect a 25-point rate hike, while the probability of a 50-point hike is said to be around 30 percent, according to CME Group data cited by Reuters.