Last week, the Federal Reserve released its minutes from its Jan. 29-30 policy meeting in which it voted unanimously to hold its policy rate in a range between 2.25 percent and 2.5 percent. “Patience” has been a constant buzzword in the Fed’s vocabulary as of late and in the minutes released, leaning towards a patient approach to interest rates was confirmed.
A separate statement last month alluded to a more flexible Fed that would be more strategic with regard to its balance sheet policy. Furthermore, flexibility would also apply to its holdings of Treasuries and mortgage-backed securities, which signaled a diversion from statements that the central bank would resume its asset purchases if economic data warranted a rate cut.
In the actual minutes, it was almost unanimous that a reduction in assets would come prior to the end of 2019. The markets were keen on the central bank’s holdings of $3.8 trillion in bonds, which it has steadily been reducing since October 2017.
“Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year. Such an announcement would provide more certainty about the process for completing the normalization of the size of the Federal Reserve’s balance sheet,” the document said.
In the video below, Thomas Digenan, head of U.S. intrinsic value equity at UBS Asset Management, and Michael Zezas, chief U.S. public policy strategist at Morgan Stanley, discuss opportunities in Emerging Markets as talk turns to central bank easing. They speak on “Bloomberg Daybreak: Americas.”
For investors looking for the continued upside in emerging market assets, whether driven by a weakening USD or continued developments around trade, the Direxion MSCI Emerging Over Developed Markets ETF (NYSEArca: RWED) offers them the ability to benefit not only from emerging markets potentially performing well, but from emerging markets outperforming developed markets.
Conversely, if investors believe that resolutions to the big issues impacting sentiment today are in motion, the Direxion MSCI Developed Over Emerging Markets ETF (NYSEArca: RWDE) provides a means to not only see developed markets perform well, but a way to access a convergence/catch-up in performance of DM relative to EM, a spread that has clearly widened over the past 6 months.
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