Investor pessimism mounts as more Fed rate hikes loom
Stock market investors are heading into the US Federal Reserve’s rate-setting announcement particularly pessimistic, with fresh milestones for bond yields and worries about rocketing inflation weighing on sentiment as the central bank is expected to hike rates further.
The benchmark S&P 500 is down over 12% so far this year after posting its biggest monthly drop in April since the start of the pandemic. Meanwhile, the yield on the US Treasury note hit 3% for the first time in over three years on Monday, doubling since the end of 2021.
The higher yields on US government debt, which is viewed as virtually risk free, mean “you probably are starting to lose some of those folks who had maybe crowded into dividend-paying stocks and were maybe having to take a little bit more risk for that income,” said Sameer Samana, senior market strategist at Wells Fargo.
"The implication for equities is you start to lose demand for stocks relative to fixed income."
