Ghost of Igloi wrote:
After Fed decision:
High multiple stock and dividend yielders finished up, with financial and cyclical stocks headed down.
Which is what I've been saying lately. Homebuilders also had a good day. Near the end of a market cycle, all the"good stocks" have been bid up, but there are a limited number of stocks still capable of delivering high growth but at a high multiple. It's happened before, and this won't be the last time....until the FED starts meaningfully raising rates.
"And the big question is not whether they are going to hike or not. The big question is why are we so obsessing over a single hike? And that says a lot about how codependent markets and central banks have become."
Investors should be aware, El-Erian said, that the U.S. central bank will likely undergo the "loosest tightening in the history of the Fed"â€”meaning a gradual increase with a relatively low terminal point.
"If we were to look at the journey, we would obsess much less with the Fed," he added.
Instead, El-Erian said global markets may be experiencing a shift to a "higher-volatility regime," meaning that asset allocations will become aggressive and price multiples will begin "looking high."
When such conditions occur, he said, markets will overshoot and act with too much correlationâ€”so "you get value that pays you overtime."