Marketbites: ECB's Historic Hike
Portfolio Manager Commentary:
U.S. stocks rose slightly on Thursday amid new comments from the Federal Reserve, and the European Central Bank (ECB) raising interest rates. The S&P gained 0.66%, the Dow rose 0.61%, and the Nasdaq advanced 0.60%.
The Fed’s comments came from Powell at a video conference where he reaffirmed the Central Bank’s necessity to act strongly in order to tame price pressures. The statement was made to ensure that the public does not believe that high inflation is the norm, even if economic growth suffers as a result.
Richard Bernstein, CEO of Richard Bernstein Advisors, commented on CNBC’s ‘Closing Bell: Overtime’ saying “I think that people are grossly underestimating what the Fed is going to have to do to fight inflation.” And then adding how “it’s incredibly ironic that investors are even considering a Fed pivot.”
The ECB faces a similar dilemma to the Fed’s and decided to raise interest rates by 75 percentage points. This is the ECB’s largest rate hike since 1999.
Chart of the Day:
For the past couple of decades, China has been providing loans to emerging markets which has only been prolonging the borrowing countries' economic pain. As global growth slows, the developing countries' debt burden to China has led to increasing concern as many of these debt loads are unmanageable. The chart below highlights this problem showing how Chinese loans make up a substantial portion of many countries' GDPs.