Home etftrends.com U.S. Stock ETFs Gain on Fed’s New Policy Shift

U.S. Stock ETFs Gain on Fed’s New Policy Shift

Advertisement
Digital Marketing & Website Design for ETFs

U.S. markets and stock exchange traded funds were higher Thursday, with the S&P 500 and Dow Jones Industrial Average advancing after the Federal Reserve signaled a loosening policy shift to allow inflation to run its course.

On Thursday, the Invesco QQQ Trust (NASDAQ: QQQ) was down 0.2%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was 0.7% higher and iShares Core S&P 500 ETF (NYSEArca: IVV) rose 0.3%.

Speaking remotely during the Federal Reserve’s annual Jackson Hole symposium, Federal Reserve Chairman Jerome Powell said the central bank will allow periods of elevated inflation above 2% to even out the previous periods when inflation fell short of its target, which has been mostly the case since 2008, the Wall Street Journal reports.

The policy shift has been interpreted as the Fed’s signal that it will not preemptively hike interest rates to head off rising inflationary pressures.

“Basically, they’re telling you, ‘We’re not going to short-circuit this economy,’” Keith Lerner, a strategist at SunTrust Advisory Services, told the WSJ, adding that the market could reposition for higher long-term inflation expectations.

Furthermore, the Fed’s goal on employment may not necessarily have the unemployment rate hit any specific target but to keep an economic outlook that brings back “marginal” workers into the labor force.

“They’re trying to bring unemployment down, and the labor-force participation rate up,” Merk Investments analyst Nick Reece told the WSJ, adding that one way the central bank can achieve this goal is by standing pat on rates even when inflation levels hit 2%.

Looking ahead, the Fed’s new policy could mean that the relative value of stocks should be higher than bonds.

“It will continue to push investors into riskier assets if they want to get any kind of return,” Lerner added.

For more information on the markets, visit our current affairs category.

newETFs.io respects the hard work of others and gives all credit to the remarkable folks at ETFTrends.com. This excerpt/article was pulled from their RSS feed; click here to view the original. Please note that on occasion, the RSS feed will not have the author. When this happens this site defaults the author to "News". Make no mistake, this excerpt/article was not created by newETFs.io, it was simply shared with you.