Moneycontrol Pro Panorama | Fed officials show markets the mirror

Representative image

Dear Reader,

The Fed just can’t seem to catch a lucky break, which in turn may be making markets nervy. As we pointed out recently that 90 percent of fund managers are predicting stagflation, but markets are rallying. One reason is because the fear of Fed’s tightening cycle strangling growth is behind them.

Fed chair Jay Powell’s utterances on being data-dependent and the minutes are all being taken as dovish signs that the Fed will do only so much as it takes to bring inflation down, but without hurting the economy too much. But this dovish interpretation itself will make life difficult for the Fed, as it leads to loose financial conditions. We had written earlier month on precisely this threat.

This boldness on display in the US markets, which is spilling over to India as well, seems to have provoked a pushback from Fed officials. Today’s FT selection (free to read for Pro subscribers), 'The Fed stares down markets', points to speeches by three officials who attempt to pour cold water on market enthusiasm. Why the disconnect between the Fed and the markets? Read the piece to find out.

This pushback may be one of the reasons why domestic markets have taken a pause, or it may simply be a (bull) pullback from the recent (bear?) rally and next week may see markets resume climbing the wall of worry. At 1.07 pm, the stock market was down by around 1 percent. Meanwhile, do read Ananya Roy’s analysis of how investors should keep an eye on commodity prices to get clues on where stock markets can head from here. She says: “…unless supply constraints or regulation-induced inefficiencies interfere, rising commodity prices typically indicate rising demand”. Read for more.

Rising interest rates are bringing banks into focus. Here’s an interview with Axis Bank’s MD and CEO Amitabh Chaudhry, where he talks about inflation, strong credit growth, outlook on margins, the bank’s conscious retail-focus and more. Do read. Rising interest rates also mean that debt mutual fund investors need to think differently. Here’s one viewpoint: With rates rising, it’s time to shift from pure debt to balanced funds.​

Middle East states set for $1.3 trillion oil windfall, IMF says (republished from the FT)

Technical Picks: Dalmia Bharat, Dabur, GAIL India, Sun Pharma and Aluminium (These are published every trading day before markets open and can be read on the app)