3.) Within equities, more aggressive investors should consider overweighting emerging markets. A more accommodative monetary policy is supportive of emerging markets.
4.) Within fixed income, I continue to favor credit sectors over Treasuries. An environment in which rates are contained but economic growth continues is likely to be supportive of high yield bonds.
Beyond specific asset allocation implications, the Fed’s decision was also a tacit acknowledgement that Washington can still cause market mischief.
As I wrote earlier this month, I expect that market attention is soon going to switch to the Congressional budget battle, meaning there’s likely more market volatility ahead. In his comments, the Fed chief himself cited the potential for volatility around the upcoming budget battle.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist.