Any Fed Tapering on the horizon?

Published on January, 26th 2020 Market and research
Flageollet

Stéphanie BIGOU

Portfolio Manager

Let’s look at the facts:

  • Since COVID hit, the US economy destroyed over 8 million jobs. The US December Non-Farm payroll number was both negative and below market expectations. The short-lived improvement we saw previous months seems at risk.
  • A change in the US health policy and the second wave of Covid-19 could result in higher mobility restrictions. A slowly recovering US labor will take more time to fill the output gap.
  • On the short term, inflation is pushed back downwards. Its correlation with job creations suggests that it shouldn’t reach pre-crisis levels before December 2021 or even later.

What do we think?

  • We doubt the Fed will change its monetary policy until deflationary risks subside. No immediate risk for tapering, which is a good news for equities.

Fed Tapering

Source: Bloomberg, Seeyond. Januaray 2000 – December 2020.

Documents written on January, 26th 2021 by Stéphanie Bigou, Global Macro Portfolio Manager at Seeyond

This article has been provided for information purposes only to professional clients as defined in the MiFID Directive. It must not be used for retail investors. The provision of this material or reference to specific sectors or markets in his article does not constitute investment advice or a recommendation or an offer to buy or sell any security. Investors should consider the investment objectives, risks, and expenses of any investment carefully before investing. Views expressed in this article as of the date indicated are subject to change and there can be no assurance that developments will transpire as may be forecasted in this article.