THE NEW YORK TIMES: After having few cares about the markets all year, investors are getting nervous as the Fed signals that harsher policies are on the way.
Wall Street’s imperviousness to bad news, which enabled stocks to double in value from their pandemic panic lows, may be starting to crack.
When the Federal Reserve signaled in September that it would soon tighten monetary policy by curtailing asset purchases, the stock market took it well, but not for long. The S&P 500 rose modestly for a few days before reversing course, pushing the index more than 5 percent below the high it set earlier in the month, which amounted to its biggest drop for the year.
Despite that setback, the market managed to eke out a 0.2 percent gain for the third quarter.
A stingier Fed is not the market’s only concern. Inflation, dismissed until recently by the Fed as a transitory artifact of the pandemic, is coming to be seen as more persistent as the prices of goods, services and labor increase. What is being acknowledged as transitory, though, is the jolt to economic growth and corporate profits provided by several trillion dollars of added spending by Congress.
With a number of threats to prosperity becoming harder to ignore, many investment advisers have become less enthusiastic about stocks. They are revising return expectations down and recommending exposure only to narrow niches. » | Conrad de Aenlle | Friday, October 8, 2021
