US equities had dropped sharply in February as wage hike prompted investors to analyze the Federal Reserve’s proposed policy tightening pace. So will the indexes reverse the decline in March?
According to market gurus, economic activity could face a slowdown due to the impact of consumer spending as higher interest rates will create more expensive borrowing. The weakness could aid rallying of indexes; there are also chances of a rebound if GDP growth remains strong in spite of aggressive rate hikes.
Schroder Investment Management North America expects interest rates to reach 3% by the end of 2019. The firm believes the Fed has now started a balance sheet reduction, and with core inflation rising, the firm expects four more rate hikes in 2018 and two in 2019.
However, from the recent developments, the equity market could be impacted by the newly imposed import steel and aluminum tariffs and could lead to a trade war in the economy.
In contrast, the US dollar index recovered in February, after a continuous fall in December and January hurt by the delay in various economic reforms. The Fed rate hikes expectations in the near future could help in a rise in the dollar index in February.
The Fed rate hikes expectations in the near future could help in a rise in the dollar index in February.
According to Financial Forecast Center, for the month of March, Dow Jones Industrial Average is expected to rise to about 25,180; S&P 500 is predicted to rise to 2,726; and Nasdaq composite is anticipated to see a growth of 7,240. So far in March, Nasdaq remained the most outperformed index with 1.90% growth, followed by S&P 500 (up 0.79%) and Dow Jones (down 0.60%).
In February, all indexes had shown weakness, with S&P 500 down 3.8%, Dow Jones slipping 4.2% and Nasdaq declining 1.8%.
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