Equities ended the week mixed as stellar earnings reports resulted in muted reactions. In addition, many investors fear rising COIVD-19 cases in India, Brazil and other countries could lead to reduced global growth. By contrast, the U.S. economy is gaining steam with the U.S. economy growing by 6.4% in the first quarter and U.S. weekly jobless claims falling to their lowest level since the pandemic began. The Federal Reserve signaled they will remain accommodative, while noting the labor market and economy are strengthening.
The Federal Reserve met last Wednesday and left interest rates near zero and made no change to the pace of asset purchases. Of note, the Chairman commented that he did observe some “frothiness” in the equity markets but he largely attributed this to increased economic activity as a result of vaccinations. He also noted that it seemed unlikely, to him, that inflation should move persistently high while the labor market still has any significant slack. These comments and actions suggest that the Federal Reserve continues to intend holding rates unchanged for the foreseeable future and does not intend to slow asset purchases in the near term.