Stock market investors are calling time on the idea that the Federal Reserve, and other major central banks, have their back.
Hopes for interest rate cuts by year-end have evaporated, given resilient data and sticky inflation, suggesting central banks will instead be inclined to keep borrowing costs around their highest since 2007 for some time.
The take away for money managers? Switch from so-called growth stocks, such as tech, and focus on businesses that can withstand the end of cheap funding — banks that benefit from higher rates and resources and consumer staples businesses that can sell goods at prices that match inflation.
Companies that pay high dividends relative to their share prices, instead of investing in growth, are also favoured.
“For years, we’ve had a capitalist world that was highly dependent on central-banking policy and the ‘Fed put’,” said Gerry Fowler, head of European equity strategy at UBS, referring to the concept of central banks supporting financial markets any time economies turn lower.
This report’s information was first seen on REUTERS; to read more, click this link.
