Hi, I'm Linda Duessel, Senior Equity Strategist at Federated Hermes.
Should investors expect volatility in the market?
Volatility generally does pick up in the summer months anyway, and this particular year we have lots of possibilities for volatility to pick up. First of all, the stimulus checks, which have been very helpful in terms of retail sales and in terms of investing in the marketplace, they're stopping. So we're bracing ourselves for that. And as we've had the stimulus checks and we've had the very very strong economic recovery that surprised most people there's been a lot of speculation in the markets. In particular areas of the market for sure. Many areas of the markets still look very, very good to us but we've already seen volatility associated with some of those pockets of speculative stocks actually getting hit hard. And then the pent up demand. I mean, we've been talking about this for months and months. The economy is opening up with the ability to remove our masks. We should all very much expect that we all want to get back out there and enjoy the economy and go out and do some traveling and go out into the restaurants, et cetera, that release of pent up demand will necessarily continue to strain, the supply sources out there. And so those shortages that we've been hearing about that have led to inflation in certain areas we should expect that to continue to happen. And we should also expect these proposals that have come out and the tax discussions related to them that we'll get more information along those lines too that the moderates will save the day and that you won't see draconian increases in taxes but we'll see and of course the big one that's the central bank the Fed.
The Fed has said for quite some time we're not thinking about raising rates anytime soon. Now we at Federated Hermes do not expect them to raise rates anytime soon. But I would argue that as soon as the Federal Reserve starts talking about tapering all those asset purchases out there that could give us a really good opportunity for some volatility. So yes, I do believe we should expect volatility and you know, it's not all bad. Actually, you don't have every year, you don't have just a strong upward move in the marketplace. Every year generally a 10% correction, should be expected. And that's a healthy thing. I think all of these ideas for where volatility might come from, would give us a really good place to experience that 10% correction. And that's not a bad thing.
Disclosure: Views are as of May 14, 2021 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. Federated Equity Management Company of Pennsylvania 21-40245 (6/21)