The Fed’s commitment: Investors will move to top-up investment portfolios

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The Fed’s commitment: Investors will move to top-up investment portfolios

Investors will move to further top-up their investment portfolios following the U.S. Federal Reserve’s first meeting since last year and since the Covid-19 crisis gripped the global economy, affirms the CEO of one of the world’s largest financial advisory and fintech organizations.

The comments from deVere Group’s Nigel Green follow the Fed’s meeting on Wednesday at which they said they would hold rates the same at near-zero for some time to help boost an economic revival.

Mr Green notes: “It was expected that rates would stay the same and the U.S. central bank’s decision was unanimous on this.

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“The focus was on Chairman Jerome Powell’s statement that followed after.

“In a press conference he said that the Coronavirus pandemic “weighs heavily” on the American economy – the largest in the world – and that the Fed would do “whatever we can, and for as long as it takes” to support the recovery and “limit lasting damage” to the economy.

“Against this backdrop, further stimulus can be expected from the Fed – and also perhaps from Congress too – in the near future as the economic revival will be a longer process than many had hoped.”

He continues: “This ‘backstop’ from the Fed slashes the threat of a second market slump even if economic data comes in worse than next quarter.

What’s next for investment portfolios?

“It provides something of a ‘floor’ for equities.

“As a result of this, investors will be seeking to further top-up their investment portfolios to get ahead at lower entry points, before the hike in values that would kick-in with another round of stimulus.”

Mr Green’s message, however, comes with a warning too. “To many, the stock markets have seemed out of step with the bleak economic data recently.

“But it could also be the case that they are giving us clear signals for the current and future shape of the economy, in which there are and will be distinct winners and losers, unlike in other recessions.

“A good fund manager will help investors seek out the opportunities and mitigate potential risks as and when they are presented to generate and build their wealth.”

The deVere CEO concludes: “The Fed believes the economic outlook for the rest of this year will be tough. But it will continue to purchase government-backed debt “at least at the current pace” and the markets believe this will be further increased in order to maintain smooth market function.

“This will support and likely boost asset prices moving forward. Investors will now be eyeing the opportunities before any fresh or enhanced stimulus packages are announced.”

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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