Comments from RBC focused on equity markets, but more widely applicable nonetheless.
RBC canvas many factors influencing US sticks, both positive and negative, but on policy have this to say:
- The economic backdrop is positive with above-average GDP growth anticipated for both 2021 and 2022, at levels that call for (approx) a 16% gain in the S&P 500 this year.
- Near-term, we are worried about a possible peak in ISM. given recent signals from the 10 year and regional Fed surveys.
- We are also watching COVID developments closely given a slight rise in new cases in the US and negative developments on variants.
- Fiscal policy tilts positive in our view. with Biden still pursuing his Jobs and Families plans but the likelihood of corporate tax hikes coming down.
- Monetary policy is in the process of shifting from positive to neutral.
- Stocks still climb amid tapering/tightening, but P/E's also tend to flatten out during hiking cycles.
(bolding above mine)
Fed monetary policy is shifting, but at a glacial pace ... at least they are talking about talking about tapering.
