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Wall Street could see more volatility during a very busy trading week that is filled with a wrath of central bank decisions, surging international COVID-19 cases, solid economic data, effects of stimulus working its way through the economy, and pent-up consumer demand. Financial markets are edge, especially considering how quickly stocks sold off following news of the White House plans for capital gains tax. A lot of the good news has been priced in for the US and some investors are focusing on Europe’s recovery potential.
The Fed will likely stay the course at the April policy meeting. The Fed will have to become even more optimistic given the better-than-expected vaccination rollout and improvement in the labor market. The Fed will stick to the script that the recovery is incomplete and that more support is warranted. Greater clarity that they will tolerate most inflation for the rest of the year could provide what the bond market needs to keep the rise in Treasury yields slow.