Powell raises rates and sets out ‘middle ground’ agenda in debut meeting

Following Jerome Powell’ s first Federal Open Markets Committee (FOMC) meeting as Federal Reserve Chairman, Jeremy Gatto, Investment Manager on Unigestion’s multi asset Navigator fund, said:

“Today’s FOMC meeting confirms the scenario we have been advocating for some time, that ‘monetary policy normalisation’ is well and truly underway. As expected Powell committed to raise rates, indicating strong global economic growth, while highlighting that the Federal Reserve is seeking a ‘middle ground’ agenda.

“As the dust settles and Central Banks across the world continue their monetary policy tightening, investors will have to adapt to tighter liquidity conditions and potentially higher volatility with opportunities lying within relative value plays, diversification and a dynamic allocation.

“In terms of our positioning, we are currently short Investment grade credit as we believe the current spreads do not compensate investors for the risk they undertake, in addition the tighter liquidity conditions and higher volatility could leave them vulnerable. We have also been underweight duration since the end of last year, as the inflation risk was under estimated by the market. With the market pricing having now converged and positioning heavily short, we have recently tactically moved long on bonds as current yield levels offer an attractive carry.”