Stock markets

Return to the rate-tightening cycle and Brexit fallout could boost equities

Although the probability of a key rate hike this summer was estimated to be close to zero a few days ago, it has increased significantly after the latest statements by Fed representatives. The Federal Reserve seems to have ticked off its fundamental checklist, now that the outlook for inflation and economic growth has improved and financial market conditions have eased after the turbulent start to the year. Even so, uncertainty surrounding a Brexit continues to pose a forecasting risk. Fed chairwoman Yellen gave a speech on 27 May, which bond market observers hoped would provide new hints with regard to an interest rate move. We have been anticipating another interest rate hike in June for quite some time now. An increase in June will send out a signal to the capital markets that the Fed’s rate-tightening cycle has not ended already after the first hike in December, as was hoped…

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