The Fed’s tone drives investors to top-up portfolios

News


30 Jul, 2020

The Fed’s tone drives investors to top-up portfolios

Investors are now “topping up their portfolios” after the U.S. Federal Reserve confirmed it would leave interest rates near-zero and continue to support the U.S. economy, affirms the boss of one of the world’s largest independent financial advisory organisations.

The comments from Nigel Green, chief executive and founder of deVere Group, follow the U.S. central bank’s meeting on Wednesday, which prompted the American benchmark index, the S&P500, to jump almost 1%.

Stocks in the Asia-Pacific mostly traded higher on Thursday too. European markets are expected to do the same.

Mr Green notes: “It’s been made clear by the Fed that the world’s largest economy, which is showing signs it is beginning to falter in its recovery, will continue to be supported by its central bank.

“This will serve to further boost asset prices.

“As such, many investors are now topping up their portfolios ahead of future announcements - which are likely to be in the same direction of travel as this one.”

He continues: “The Fed’s considerable and ongoing support is acting as a backstop for stocks.

“The tone of the statement, and the Fed’s fears over the economy, suggest that additional measures  will be implemented. Therefore investors are bolstering their investment portfolios as entry points can be expected to continue to go higher as we move forward.”

Mr Green’s observations also come with a warning.

“The buoyant stock markets can seem out of step with the slew of alarming economic data.

“But what is happening, as a closer look at the markets reveals, is that, of course, not all stocks and sectors are rising equally. Indexes are being driven up across the board by the ‘winners’ of this new era including tech, biotech, home entertainment and established online retailers, amongst others.

“Therefore, investors should work alongside a good fund manager to seek out those stocks most likely to generate and build their wealth over the long-term.”

The deVere CEO concludes: “The Fed’s cautious and accommodative tone on Wednesday will give investors the confidence they need to further enhance their portfolios.”