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But with the market at an all-time high, now is probably a good time to hedge against potential downside, experts say. That's especially the case because there's an elevated degree of risk facing stocks, and the cost of some insurance measures is historically cheap. Related storiesThe S&P 500 also looks overextended on a technical basis, according to many measures. AdvertisementRosenberg Research"The definition of a stretched market is one when the S&P 500 gaps 14% or more above the 200-day trendline. Beyond extreme, in fact — back to 1928, the S&P 500 has only drifted this far above the moving average 7% of the time," Rosenberg said.
Persons: Jim Smigiel, they've, Louis Fed, Phillip Colmar, Colmar, David Rosenberg, Rosenberg, Steve Sosnick, we're, Smigiel, Sosnick Organizations: Service, Nvidia, Microsoft, Bank of America's, Survey, Bank of America, SEI, Fed, Louis Fed Inflation, MRB Partners, Rebels, Rosenberg Research, Interactive Brokers Locations: Ukraine, Russia, Israel, Palestine, Suez
In this videoShare Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailInflation numbers are signaling the Fed will keep rates higher for longer, says SEI's Jim SmigielJim Smigiel, SEI chief investment officer and Ross Mayfield, Baird investment strategy analyst, join 'Closing Bell Overtime' to talk the day's market action, inflation numbers, the state of the economy and more.
Persons: Jim Smigiel Jim Smigiel, Ross Mayfield, Baird Organizations: SEI
Softening inflation data for May likely has bought the Federal Reserve at least a month, though not much more, before it has to figure out what to do next. Following the CPI release Tuesday morning, markets priced in a 95% probability that the Fed will skip a hike at its two-day meeting concluding Wednesday, according to CME Group data . "The latest consumer price inflation data doesn't change the Fed outlook for a June rate hike skip, but it illustrates the 'should I stay, or should I go' dilemma that the Fed faces when considering further rate increases," wrote Gregory Daco, chief economist at EY-Parthenon. After this week's meeting, Fed officials will release their "dot plot" rate projections for the next few years, plus their collective outlook on inflation, GDP and unemployment. The retreat on inflation, then, presents both an opportunity and a challenge for a Fed that was caught off guard by the big price surge.
Persons: Gregory Daco, Jim Smigiel, Krishna Guha, Guha, Jerome Powell, Ian Shepherdson Organizations: Federal Reserve, Group, SEI, Evercore ISI, Tech, Pantheon Locations: EY
Going forward, Smigiel also believes that value-oriented assets will be the next market leaders. Despite starting 2023 off strong, the stock market has struggled to maintain its rally this year in the face of a potential recession, a dire banking crisis, and fears of rising interest rates. But that doesn't mean the stock market will be in the clear anytime soon. Value names will the next market leadersTo capture returns going forward, Smigiel isn't focused on the direction of stock market movements. This is especially true for US investors, Smigiel said, since US assets already make up such a large portion of global cap-weighted indexes.
Concerns have been heightened by the wild swings in market interest rates since the collapse of Silicon Valley Bank (SIVB.O) last week. Fund managers advise shunning high-yield bonds, despite their attractive yields, because of the risk these bonds could be hit by ratings downgrades, defaults and a squeeze in company earnings. Refinitiv Lipper data showed high-yield bond funds, after seeing an inflow of $7.63 billion in January, faced an outflow of $11.51 billion in February. Reuters GraphicsSo far this month, high-yield bond exchange-traded funds (ETFs) have seen a total outflow of $506 million. However, safer money market funds have attracted $28.76 billion, and government bond funds have seen an inflow of $15.52 billion since February.
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