BlackRock Inc., the world's largest asset manager, is putting a 6% level for U.S. interest rates on the map --- a view that is only gaining more traction.
U.S. stock investors are clearly not too happy with what Federal Reserve Chairman Jerome Powell has said in the past two days. And there’s reason to think they’ll get even more dissatisfied in the weeks and months to come amid growing expectations that the fed funds rate may reach 6% this year, one of the highest levels in the past two decades. Rick Rieder, chief investment officer of global fixed income for New York-based BlackRock Inc. BLK, put a 6% level for U.S.
With investors and traders largely focused on the size of the Fed’s next interest rate hike in two weeks, it’s the most likely path for interest rates over the next handful of months that has the potential to roil financial markets even further. Fed funds futures traders now see a 47.1% chance that the fed funds rate will get to 5.75%-6% or higher by July, and a 50.5% chance of that happening by September, according to the CME FedWatch Tool. That’s up from a current fed funds range of between 4.
“Growth stocks, in particular, have thrived on the expectation that inflation would quickly become a non-issue and equities would resume a more normal growth-driven rally phase,” Keller said. “Our main equity benchmarks, like the S&P 500 and Nasdaq Composite, are very growth-oriented, so higher rates suggest limited upside for these benchmarks until interest rates have reached their peak for the cycle.
“A 6.0% terminal rate expectation, if widespread, would likely see the dollar extend the recovery that began in February,” said Marc Chandler, managing director atIn addition, “the stock market would take it hard,” with the S&P 500 likely to fall near 3,800-3,850 — the level that corresponds to the “congestion” seen at the end of last year, he said.
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