Fed governor Stanley Fischer on Monday hinted at increased interest rates this year by mentioning possible upticks in inflation.
BMO’s Chief Investment Strategist Brian Belski and Pimco’s global strategic advisor, Richard Clarida, addressed the Fed’s next move on CNBC’s “Power Lunch” and agreed the market would not see a rate hikes until the summer or even fall.
“We have to kind of take a step back and remember how bad January was and how much volatility there was in the markets, not only in the stock markets, but the bond markets,” Belski said. He believes that the Fed will wait for better compensation on both earnings and GDP fronts. It’s in “credibility mode,” as he described it, and waiting to see how things play out in the market.
Clarida then broke down Fischer and Fed governor Lael Brainard, who both spoke Monday, into two camps: “hawkish” and “watchful and waiting,” respectively. In addition, he thinks that a lot of markets will begin to stabilize if oil prices find a bottom.
Going forward, Belski said that the market may not return to the sound strategies of credit, China and oil after its most current “freak out.” “That is not part of the strategy, not part of the investments with respect to fundamental strength going forward.”
When asked about the possible correlation between a 10-year Treasuryyielding less than 2 percent and the risk of a global recession, Clarida said there’s no cause for worry. He cited capital coming from countries with negative interest rates as the reason behind U.S. bonds going down. “I think as the global sentiment stabilizes, then some of that flight to safety in Treasurys will flow out, and there will be upward pressure on bond yields.”