Market fluctuations may persist for a few more days. However, the worst of Wall Street is long over and the overall market movement should remain positive going forward. At this stage, it will be prudent to invest in regular dividend-paying growth stocks with a favorable Zacks Rank. The growth potential of these stocks will capture the market’s upside while a high dividend yield will be useful if volatility persists for a longer period.
On Aug 27, Fed Chairman Jerome Powell announced that the newly adopted “average inflation targeting” policy will allow inflation and employment to run higher together for some time in order to support the pandemic-ravaged economy.
The Fed’s target of 2% inflation will remain unchanged. However, under the new policy, the inflation rate will remain higher than 2% along with increased employment for some time. This inherently means that the benchmark interest rate, which is currently low in the 0-0.25% range, will remain at that level for a longer period than expected.
A low interest rate will reduce the cost of capital for businesses and consumers have a lesser propensity to save due to a low deposit rate. Therefore, higher spending by businesses and consumers is likely to boost the overall economy and raise stock prices.
The U.S. initial public offering (IPO) market will witnesses the busiest week this week since May 2019. This week, 12 IPOs are expected to raise around $6.8 billion from the market. These companies are looking to take advantage of the astonishing recovery of the U.S. capital market defying coronavirus-induced devastations.
A massive surge in IPO is indicating ample investor appetite for new stocks and growing confidence for risky assets like equities. In this regard, an ultra-dovish monetary stance taken by the Fed has helped Wall Street to reach a record high level. Heightened IPO activities mean bullish