Analysts are Not Counting on Another Market Rescue from the Fed
Traditionally, when the US stock market faces significant challenges, the Federal Reserve has intervened by providing financial support to help stabilize it. This intervention is based on the belief that once the market regains stability, it will resume generating profits. However, in recent quarters, the market has shown limited growth, with notable improvements in major indexes becoming less frequent and impactful. Consequently, there are concerns among some analysts that if the market faces another crisis, the Fed may not respond as promptly or assertively as before.
“The Fed may be more hesitant to veer away from its tapering plans and reassure the market as it did in the previous cycle,” mentioned Bank of America strategists in a note to investors obtained by Bloomberg.
“Investor confidence in buying during downturns may continue to decline as long as this stagnant price trend persists,” the strategists remarked. “The market might require a series of negative developments to prompt the Fed to act or to reach more appealing valuation levels.”
Bank of America Corp. strategists suggest that the Federal Reserve might not rush to rescue the stock market this time. Source: Bloomberg Markets
— Bloomberg Markets (@markets) October 12, 2021
Bank of America’s analysts hold a differing opinion compared to analysts from prominent financial institutions like Goldman Sachs and JPMorgan & Chase, who believe that these concerns are exaggerated. Analysts from these institutions still recommend that investors utilize buy-the-dip strategies. The BlackRock Investment Institute has taken a neutral stance, expressing that while the current trend may lead to market volatility soon, nothing is definitive at this point.
“We are maintaining a neutral stance on US equities from a tactical standpoint, as we anticipate the leveling off of US growth momentum and foresee other regions benefiting more from the broader economic recovery,” BlackRock strategists stated. “We see a limited upward trajectory for risk assets and anticipate occasional market retreats.”
