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US Market Update – Fed Eases Taper Tantrum Fears

Yields pull back on Fed speak

A relatively calm session on Wednesday, with Europe ending the day a little mixed and US indices edging higher, led by tech.

There’s a lot of US political noise now as far as the markets are concerned. The shocking events on Capitol Hill and now the likely prospect of an historic second impeachment for President Trump is front and centre of the news flow but it’s having minimal impact on the markets.

Investors are far more concerned with the incoming administration and what that means for stimulus prospects and inflation.

Soothing words from Fed policy makers over the last 48 hours have helped take the edge off the yield moves which could provide some relief. I guess we’ll see in the coming days just how much.

Should we see the 10-year drop back below 1%, it would suggest investors are far more at ease with the Democrats stimulus plans and could be bullish for stock markets, no longer held back by the prospect of premature Fed tightening.

The political distraction will likely remain ahead of the inauguration next week as security is ramped up.

Any hopes of an impeachment trial in the Senate over the next week have been quashed by Majority Leader Mitch McConnell who dismissed the idea of reconvening for a trial before Trump leaves office.

 

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