The Fed stays put, and plans a long pause.

The December meeting contained relatively few surprises in the economic outlook, and confirmed the Fed’s intention to let the economy run hot in an attempt not no let expected inflation drop.


  • As widely expected the Fed kept rates stable and did not make any substantial changes to the economic outlook.
  • The dots signaled a strong preference for stable rates in 2020 with only four FOMC members now seeing a hike.
  • Chair Powell reiterated the Fed’s concern for stubbornly low inflation and reckoned that labor market slack is larger than expected. This will be conductive to a review of the policy rule, which will likely lead a downward revision of the expected policy rate path in the coming meetings.
  • Given our less upbeat 2020 growth forecast (1.6% versus the 2% penciled in by the Fed) and the slide in expected inflation we stick to our forecast of another rate cut in the first half of 2020.

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Market Compass January 2021


US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
Following a monster rally in stocks last autumn, multiples are well above historical averages, but equity investors can count on lingering low yields, tighter credit spreads and increasing central banks’ balance sheets which in turn maintain low the cost of equity and the discount rate of future cash flows.
Video Outlook 2021: Repair and Despair
Watch the Outlook video with Vincent Chaigneau, Head of Research at Generali Investments