During Jerome Powell's press conference on Wednesday, June 16, it was acknowledged that inflation was higher than the Fed had estimated and that if this trend continued then the Fed would act appropriately by changing its policy. However, as has been clarified, for the time being, this scenario has low chances.
It is extremely difficult to study the data and for the time being the Fed’s estimates speak of a transitional situation in which inflation will start to move again lower in the coming months. In order for the Fed to have more time to weigh events, there has been an increase in inflation estimates for 2021 from 2.2% to 3.0%.
The Fed acknowledges that the volatility is particularly high and that predictions gather a high percentage of uncertainty, but estimates that inflation will once again be at an average of 2.1% between 2022-2023. Regarding the normalization of monetary policy, the Fed estimates that it will start raising interest rates from 2023 compared to previous estimates for 2024.
Based on the above and the fact that investors have now clearly outlined the basic scenarios for inflation, it seems that the market is beginning to leave behind a "disturbance" that began in March 2020 and has lasted until today.
Falling interest rates restore liquidity in the markets with the result that Big Tech have recovered significantly and have moved to a new high during Thursday's conference. Although conditions are volatile and the inflation story is not expected to end soon, leading tech companies with strong balance sheets are expected to have even greater investment interest, especially as investors gradually move away from social media- driven investments.
Already, in June, the Nasdaq has been the leader as far as returns are concerned, with the other indices moving more cautiously.