Last week's main event was Wednesday's meeting of the US Federal Reserve. We did not learn anything fundamental from the US central bankers. Fed Governor Jerome Powell reiterated that the US Federal Reserve will not raise key interest rates until at least 2024, saying that it is crucial for the US Federal Reserve to achieve both of its monetary policy goals of full employment and inflation at a sustainable level of 2%. At the same time, Fed significantly raised its forecast for US economic growth for this year to 6.5%. If this forecast is fulfilled, it will mean the fastest growth of the US economy in the last 40 years. However, it should also be added that this growth will be almost exclusively financed by the new debt of the US federal government, i.e. a significantly increased issuance of government bonds. At the same time, it is also true that a large volume of new government bonds will continue to be bought by the Fed as part of the quantitative easing program or the money printing. It is therefore a question of the extent to which the growth of the US economy will be sustainable in the medium term.
As regards stock markets, the broadest global stock index MSCI All Country World recorded a loss of -0.5% last week. From a sectoral perspective, value stocks were much more successful, with the MSCI All Country World Value Index writing off "only" 0.1%. According to the MSCI All Country World Growth index, growth stocks declined by 0.8%. Central Europe did not perform well at all, as the Central European stock index CECEEUR declined by 2.5%.
Bond markets weakened slightly again as the broadest global bond index, Bloomberg Barclays Global Aggregate Bond, declined by 0.2%. At the same time, since the beginning of the year, this bond index has been losing 4.0%. The average global bond yield to maturity increased by 0.02 percentage point to 1.16%. The yield to maturity of the most-watched bond, 10-year US Treasury Bond, rose another 0.1 percentage point to 1.72%.
Commodities did not perform well at all this time. S&P GSCI global commodity index fell by 3.5%. The price of the North Sea Brent fell by 6.8% to $ 65. By contrast, gold rose 1.3% to $ 1,742 an ounce.
Michal Stupavský
Investment Strategist at Conseq Investment Management, a.s.