Expect to hear the word “inflation” quite a bit this week as we head into another key Federal Reserve meeting.
Last week, the S&P 500 had itself a good week. But, digging a little deeper, we see it wasn’t due to broad-based strength. The growth style when looking at ticker: IVW returned 1.42%. But the value style, ticker: IVE returned a negative 0.61%. One of the reasons for such a wide divergence of performance could be the fact that interest rates fell on the week, and when rates fall growth typically outperforms.
For the week ahead, we get a Fed decision on interest rates on Wednesday and the Fed has made clear that it believes that the current level of inflation is transitory. Based on the current level of interest rates even with a hot CPI inflation number last week, it seems like the market agrees with the Fed. This drop-in interest rates could also be telling us that the market does not believe that the Fed chair will outline a tapering plan at this meeting.
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