Central banks: Fed and BoJ show their cards

In this week’s video update:

  • A look at how the U.S. Federal Reserve (Fed) used this week’s announcement to set markets up for a likely rate hike in December
  • Bank of Japan (BoJ) continues rates and quantitative easing, adding efforts to increase yield curve between Japanese bonds and the yen
  • Why corporate earnings will be a key data point to watch across markets in the coming days

On this week’s update, Program Director, Capital Market Insights Todd LaFountaine meets with Chief Investment Strategist Erik Ristuben to discuss the week’s global market events and what is ahead.

As noted in the “No great surprise – Fed rate remains steady” blog post earlier this week, the Fed didn’t move rates this week, but rather used their latest announcement to set market expectations for a likely rate hike in Dec, with wage pressures likely being one of the key indicators that may help determine that potential hike.

Ristuben then turns to the announcement by the BoJ this week. While announcing their continued commitment to their negative rate and quantitative easing program, the BoJ focused on the 10-year government bond, hoping to create a bigger yield curve between that bond rate and the rate on the yen to help credit creation. The news was good enough that the Nikkei Index ended up 2% for the week.

As the seasons change and we approach upcoming third quarter, Ristuben notes global corporate earnings as a key factor for investors to be focused. Currently, he believes there is little room for improvement in U.S. corporate earnings, but Europe may have some improvements while emerging markets are far more likely to see growth—an area to watch closely in coming days.

Learn more about Russell Investments expectations for global markets in our next Global Market Outlook next quarterly update, being released in early October.