A hawkish message from the Federal Reserve amid a robust stock market rally is presenting investors with a conundrum: how to maintain exposure to rising equities while also guarding against the possible upheavals tighter monetary policy can bring
, where a wave of defaults could have repercussions for banks and the broader economy, as well as other credit market sectors.
The S&P 500 edged up 0.1% on Wednesday after shuffling between gains and losses. Bond yields, which move inversely to prices, inched higher. The S&P 500 is up 15% this year, while the NasdaqJames St. Aubin, chief investment officer at Sierra Investment Management, has been adding to equity positions during the rally but plans to reverse that stance if the trend starts to change.
Mark Heppenstall, chief investment officer of Penn Mutual Asset Management, believes a burgeoning stock market rally could loosen credit conditions, threatening to exacerbate consumer prices - an undesirable outcome for the inflation-fighting Fed.
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