Aurelia Butler

NEW YORK (Reuters) – Federal Reserve Governor Lisa Cook said Friday that the outlook for the next stage of central bank monetary policy has grown less clear after the institution has taken appropriately aggressive steps over the last year to lower price pressures. As the Fed moves toward its next decision on where to set interest rate policy, “I am weighing the implications of stronger momentum in the economy apparent in economic indicators over the past few months against potential headwinds from recent banking developments,” Cook said in the text of a speech to be delivered before the Georgetown University McDonough School of Business. “If tighter financing conditions are a significant headwind on the economy, the appropriate path of the federal funds rate may be lower than it would be in their absence,” Cook said, while adding “if data show continued strength in the economy and slower disinflation, we may have more work to do.”Cook spoke as central bank officials are about to head into their quiet period ahead of the May 2-3 Federal Open Market Committee meeting. Officials have signaled that they expect to raise rates by a quarter percentage point to between 5% and 5.25%, matching market expectations. With inflation showing signs of moderating in an economy dealing with the still uncertain aftermath of banking sector problems last month, markets expect this to be the last rate rise in campaign begun in March 2020. Fed officials, at their March meeting, penciled in forecasts that suggest the looming rate rise will be the final one and that they’ll hold steady for the rest of the year. But they are also unclear how much credit conditions might tighten and restrain growth as a result of the banking sector turbulence.In her remarks, Cook said that inflation has been moving down but underlying price pressures still remain strong and embedded in the economy. She pointed to signs of cooling housing sector inflation as a reason for hope that price pressures will abate further, and noted that inflation, as measured by the personal consumption expenditures price index, is likely to fall to 4% in March from 5% the prior month. Cook also said the labor market remains strong but there are signs that’s also starting to slow down. “Wage growth has moderated somewhat from the rates reached about a year ago” and “indicators of hiring have slowed,” Cook said. She also said the job openings, while still high, have also shrunk. More

LONDON (Reuters) -The Bank of England needs to focus on tightening monetary policy sufficiently to control inflation, and ensuring that no “inflationary mentality” develops, Bank of England Deputy Governor Dave Ramsden said in an interview published on Friday.”When I look at where inflation is and where it needs to get to, I’m more focused on making sure that (we) stay the course in terms of the monetary policy decisions needed to get inflation back to target,” Ramsden said in an interview which will appear in Saturday’s edition of The Times. “(High inflation) is a bigger risk than over-tightening,” he added.Economists polled by Reuters expect the BoE to raise rates by a further quarter point on May 11 to 4.5%, in what would be its 12th consecutive rate rise since starting to increase interest rates in December 2021.However, in recent months two members of the BoE’s Monetary Policy Committee have voted against further rate rises, arguing that the economy has yet to feel much of the impact of past increases.Ramsden said he was concerned that seven months of double-digit inflation risked embedding longer-term expectations of high inflation among businesses and the public, which could lead to more persistent inflation.”We need to make sure that an inflationary mentality doesn’t develop in the economy as we’ve seen in previous periods,” he said.Ramsden, who is responsible for financial markets and banking, said the BoE remained “very vigilant” about market risks after the collapse of Silicon Valley Bank and Credit Suisse.Echoing comments from Governor Andrew Bailey, he also said that it was important for the BoE to look at Britain’s system of deposit insurance.”It’s really important that we learn the lessons of the last few weeks,” he said. “When something goes wrong, someone has to pay for it. And then the question is how much do you pay for it up front by funding deposit insurance, and who does that funding.” More

Here’s a look at the week ahead in markets from Lewis Krauskopf in New York, Kevin Buckland in Tokyo, Alun John, Naomi Rovnick and Amanda Cooper in London.1/ MEGACAP MOMENT    The heart of first-quarter U.S. earnings season arrives next week, with some of the biggest companies reporting results.    Three of the four biggest U.S. companies by market value — Microsoft (NASDAQ:MSFT), Google parent Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) — are scheduled to post earnings, with Microsoft and Alphabet due Tuesday and Amazon on Thursday. Facebook (NASDAQ:META) parent Meta Platforms is sandwiched in between on Wednesday.    Megacap tech and growth stocks have had a resurgence across the board in 2023 after getting pummelled last year, as Treasury yields have moderated and investors gravitated toward large companies seen as having secure balance sheets following last month’s banking crisis.    Their results will put that stock momentum, as well as the market’s overall momentum, to the test. (Graphic: US tech stocks regain some lost ground – https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/znvnbjybgvl/chart.png) 2/ NEW CHIEF IN TOWNNew Bank of Japan governor Kazuo Ueda chairs his first monetary policy meeting at the end of the week. Confidence is growing that ultra-dovish policy will remain unchanged next Friday, but economists flag the non-negligable risk of another surprise.    Morgan Stanley (NYSE:MS) MUFG, for example, puts the risk at 20%, even as it says its main scenario is for no action next week after Ueda’s repeated comments over recent weeks that stimulus settings remain appropriate for now.    Sources have told Reuters the central bank is warming to the idea of further tweaks to the controversial yield curve control policy that has sapped market liquidity with its massive bond purchases, but likely at a much later time this year.    Corporate Japan, for its part, wants Ueda to focus on market stability rather than policy changes, a Reuters poll showed. (Graphic: Ueda’s YCC conundrum – https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/akpeqnddlpr/chart.png) 3/ DON’T BANK ON ITQ1 has been interesting for the banks. Economic euphoria in January was followed by a reality check in February, when investors decided rates would likely rise some more but the world would avoid recession – a sweet spot for financials. March brought home the impact of tighter credit conditions. Two mid-tier U.S. lenders folded as customers pulled their deposits and ran for the hills.Things reached boiling point with Credit Suisse’s hastily arranged takeover by rival UBS. The whole debacle wiped almost $180 billion off the value of Europe’s banks at one point. The sector has since recovered, but it’s still worth $70 billion less than it was before Silicon Valley collapsed in early March. UBS, Deutsche Bank (ETR:DBKGn), Santander (BME:SAN) and Barclays (LON:BARC) are some of the big guns reporting next week – along with the Credit Suisse’s earnings swan song. (Graphic: European banks rollercoaster quarter – https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/mopakyxxwpa/chart.png) 4/ GUESS WHO’S BACK?European currency bulls. And they’re hoping for some hawkish commentary from the European Central Bank’s policymakers and for plenty of data that suggests the central bank could keep rates higher for longer than the Federal Reserve.The premium of U.S. market rates over their European counterparts reached their narrowest in many months in early April, on the view that U.S. rate cuts are coming later this year while borrowing costs in Europe have further to climb.    Those expectations have pushed the euro, the pound and the Swiss franc to multi-month highs, although this rally could lose steam as markets reassess whether Fed cuts are really coming.     Anything that dents the dollar’s yield appeal should help keep European currencies looking perky, at least for now.       (Graphic: How the euro has moved – https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/egpbyqnnzvq/eur-usd-swap-new.png) 5/ ON THE EDGEThe outlook for European stocks is on a knife-edge, as a resilient economy clashes with prospects of stubborn inflation and tighter monetary policy. First-quarter eurozone GDP data is due April 28. Output indicators analysed by consultancy Capital Economics show the bloc’s economy has expanded. Inflation reports for Germany and Spain may also reveal price rises have been sustained and are sticky.But March’s market turmoil caused by U.S. bank failures is not viewed as likely to dissuade the ECB from hiking rates. Goldman Sachs (NYSE:GS) sees the euro zone deposit rate rising to 3.75% by July. Equity investors remain cautiously optimistic. The STOXX 600 index has gained 2% this month. But German construction companies are reporting cancelled orders and euro zone consumer confidence is weak. Robust first-quarter growth may not mean Europe is out of the woods yet. (Graphic: Euro zone GDP vs STOXX 600 – https://www.reuters.com/graphics/EUROZONE-GDP/myvmojdqbvr/chart.jpg) More

NEW YORK (Reuters) – Vanguard, the world’s second-largest asset manager, increased exposure to large bank’s bonds during the banking rout in March, taking advantage of cheap valuations, according to a report seen by Reuters.The collapse of two U.S. regional banks last month triggered wild price fluctuations across fixed income markets, with worries over the banking sector weighing broadly on corporate bond prices.”The banking troubles offered a brief window to add large banks at compelling valuations,” said the report, written by Sara Devereux, global head of fixed income group, and her team. “We had little exposure to troubled banks and do not see evidence of a systemic risk to the financial system,” it said.Vanguard expects volatility in bond markets to continue in coming months, which could present more opportunities to buy oversold debt securities, but it remains cautious about adding risk to its bond portfolios as it expects the economy to enter a recession this year.”The time for a full risk-on moment has not yet arrived,” the report said.Last month’s bank failures have strengthened expectations of a slowdown in the economy, as banks are expected to become more cautious and restrict lending. Investors are now assessing whether the Federal Reserve will keep hiking rates to fight inflation after a largely expected 25 basis point hike at its next rate-setting meeting in May. Many expect the central bank to cut rates later this year to loosen the grip of higher borrowing costs on the economy.Core inflation, however, is likely to be sticky, according to Vanguard, limiting the Fed’s ability to ease monetary policy in coming quarters.”We believe the Fed will ultimately hoist the fed funds rate above 5% by mid-year before pausing,” it said.”Barring a major economic surprise, we think the Fed will hold policy rates high for longer than the market currently expects.” More

The writer is author of ‘Extra Time: Ten Lessons for an Ageing World’ The news this week that India’s population is forecast to overtake that of China’s is a powerful psychological moment. Not for three centuries, since the Mughal Empire outnumbered the Qing Dynasty, has India been bigger than its rival. The Chinese Communist party fears that China, whose population is undergoing a rapid contraction, may get old before it gets rich. Western fears of stagnation are leading to anguished debates about immigration and calls for ‘pronatalist’ policies. But governments everywhere should resist the temptation to weaponise population. Demographic changes are demolishing old certainties. One minute we are fretting about 8bn humans wreaking havoc on the planet. The next, we are starting to panic that falling birth rates and ageing populations will slow economies and erode civilisations. In Japan I have sat in anguished debates about the possible extinction of the race. In America — which until now has been an exception to the ageing, rich world — I talk to policymakers who worry that immigrant groups are ceasing to fuel the nation because they don’t have as many children as they once did. India’s expanding workforce is envied by greying nations. Forty per cent of its population are under 25, and roughly 1 in 5 of the world’s under 25-year olds live there. Its median age of 28 contrasts favourably with 38 in the US, and 39 in China. But this huge and youthful pool will only be a blessing for their country if they can find jobs. India has a burgeoning middle class and is a global leader in IT, making it well-positioned to win investment from companies seeking to diversify away from China. But the jump to high-end manufacturing, which propelled countries like Taiwan and South Korea to prosperity, has so far been elusive in a nation where almost half the workforce still works on the land, and 46 per cent of adults over 25 didn’t finish primary school. And its appeal as a democratic counterweight could decline under prime minister Narendra Modi’s repressive policies.Around the world, the race is on to secure demographic dividends before falling birth rates drag on economic growth. But many growing countries — from India to Egypt to Nigeria — may struggle to achieve the kind of demographic dividend reaped by the Asian tigers unless they can also make productivity gains. Africa’s raw materials could be a boon to the continent but for the moment, China is using its heft to secure resources there, establish influence and offset its own ageing profile.In the coming decade, countries across the board will strive to maintain GDP per capita as population growth slows. Canada has just welcomed the highest number of immigrants in its history, as part of a strategy to offset its low birth rate. Western European countries are raising retirement ages. The fear is that we may be on the verge of a vicious cycle. If governments charge shrinking workforces more tax to support the elderly, younger citizens may find it progressively less affordable to have children. As nations grapple with demography, a growing number are adopting formal policies to either raise or lower fertility. Of the world’s 197 nations, 69 have goals to reduce the birth rate, and 74 have goals to either raise or maintain it. The danger comes when countries which are losing demographic ground start to put unacceptable pressure on women to bear children. Both India and China have been seeking to control fertility for decades: India was the first country in the world to have a national family planning policy, which it launched in 1952, while China implemented its one-child policy in 1980. Both nations imposed brutal measures to restrict family size in pursuit of development goals. These have had far reaching repercussions. Despite dropping its one-child policy in 2016, the Chinese Communist party has been unable to reverse the trend. In India, most of the growth is driven by only 5 of its 36 states. It is important to remember that human beings are not factors of production. The modern story of falling birth rates is largely one of female liberation. Many democracies are now paying “baby bonuses” to help with childcare costs. But nastier regimes can revert quickly to more repressive methods. In Turkey, President Recep Tayyip Erdoğan has denounced family planning and said mothers have a responsibility to provide descendants. In Iran, child marriage is on the rise. Russia has revived the “mother heroine” award for women who have ten or more children. Commenting on India’s milestone versus China, the UNFPA, the UN’s sexual and reproductive health agency, has called for a global emphasis on the quality of life, not the quantity of people. It has also found that countries without policies seeking to boost fertility rates score much more highly on indices of human freedom than those which do. Governments fear losing influence in the world if their populations don’t keep pace with those of their rivals, and they fear stalling economic growth. For starters, they must accelerate alternatives to boosting births. Keeping citizens healthier into old age enables them to work longer. Investing in technology and skills can maximise the potential of existing populations. Adopting pro-migration policies can re-energise a society, as long as it’s combined with concerted efforts at integration.The headlines which greeted India’s leap forward were couched in macho language about “overtaking” and “relegating”, showing how much the cold hard science of demography is bound up with the psychology of “winning”. But big is not always best — as the coming decade may [email protected] More

They used to say you were more likely to get divorced than break up with your bank. The high street institutions we stick with for most of our adult lives are often the ones who offered us a free railcard at university. But this should no longer buy our loyalty, as the amount of interest they pay is likely to be derisory. Despite 11 rate rises in a row from the Bank of England, some £256bn worth of cash in savings accounts is earning zero or very little interest, according to research published this week. On Thursday, the UK’s financial regulator warned MPs of “onerous interventions” if banks continued to profit from the customer inertia.As more of us rediscover the long-forgotten savings habit, however, we are voting with our feet. Record numbers of consumers switched banks in the final quarter of 2022, according to the latest data from the Current Account Switching Service. The annual total of 1mn switchers was up 20 per cent on the year before; the quarter figures due next week are likely to show further progress.Much of the motivation behind this change from banking customers is the ability to now get higher interest on your savings. In the UK, banks including HSBC, NatWest and RBS additionally offer cash bungs of £200 to move your money — something that’s proving extremely popular during the cost of living crisis.I spoke to one banking insider this week who suggested the high level of churn from “serial switchers” is starting to be counterproductive for the banks. “The people switching are money savvy, but they’re not the most profitable customers,” she said, alluding to the high cost of onboarding them, only to lose them to a rival a year later.However, costs could skyrocket if regulators insist that banks increase interest rates on existing customers’ savings accounts, many of which are still less than 1 per cent. Of course, savings rates aren’t the only reason to break up (or make up) with a bank. Customer service is important too, and this costs money. So it’s important that consumers have a choice. Satisfying our different banking needs increasingly involves having more than one bank account. Digital banks such as Monzo and Starling have attracted millions of customers with fee-free foreign spending and budgeting tools. The functionality of setting up separate savings “pots” and “spaces” is valuable, even if the interest rates on offer are small.In any case, younger, digitally savvy banking customers haven’t seen rates like these in their entire working lives. If they want to get a higher rate of interest, they can do it on their phones in a few clicks. The speed and ease with which the digital generation can transfer money away is a new and worrying problem for the banks.Although no accounts pay close to the high rate of inflation, it’s never been easier to ensure your emergency fund and short-term savings are at least earning something. New banking entrant JPMorgan Chase UK has attracted large volumes of customers by offering 3.1 per cent interest on savings of up to half a million pounds, and 1 per cent cashback on purchases. One aim is to get wealthy customers to open an investment account with Nutmeg, the digital wealth manager it acquired in 2021. Some 30,000 customers have signed up since Nutmeg went live on the Chase app in February. However, holding too much of your long-term savings in cash can be a costly mistake. Although investors remain jittery about the markets, the novelty of earning interest on cash savings could be wiped out by future tax bills. Since April, Brits with an annual income above £125,000 are additional rate taxpayers, and must pay 45 per cent tax on savings interest. The tax shelter of Isas are the obvious answer. The top cash Isas pay just over 4 per cent, but a transfer logjam has emerged as savers attempt to access the best rates.You can also hold up to £50,000 in Premium Bonds and while no interest is paid, prizes are tax free. The “prize rate” is currently equivalent to 3.3 per cent and could well rise again as the chancellor increased the funding target for National Savings & Investments, the state-owned savings bank, at the Budget last month.Another fast-rising trend is holding money market funds within your stocks and shares Isa. These offer a comparable yield to the prevailing base rate, and typically invest in short-dated government bonds. They’re not risk-free, but as a short-term strategy many investors are adjusting the balance of their portfolio as they ponder their next move. For investors and savers, cash is a flexible friend in uncertain times. As rates look set to rise further, wherever you’re holding yours, make it your mission to get it working every bit as hard as you do. The writer is the FT’s consumer editor and the author of ‘What They Don’t Teach You About Money’. [email protected] Instagram @Claerb More

NEW YORK (Reuters) – As U.S. stocks test the top of a range that has held for months, two widely used analytical styles appear to be painting conflicting scenarios for where they might go next.Technical indicators such as equity price movement largely show stocks are poised to continue a rally that has seen the S&P 500 climb 8% year-to-date, analysts who track them said. Many investors who look to fundamentals, on the other hand, see choppy waters ahead when they study measures like corporate earnings and valuations. Few market participants lean entirely on one style and neither approach is foolproof. Investors say the recent divergence, however, illustrates the wide range of outcomes faced by markets this year as they stare down a spate of thorny issues, from a possible recession to whether stocks have factored an expected slide in corporate earnings. “This is the first year in a long time that technicians are sort of diverging from the fundamental or macro analysts,” said Mark Newton, global head of technical strategy at Fundstrat Global Advisors. “Everybody is very, very negative,” but from a technical perspective, the market looks good, he said. TECHNICALLY SPEAKING The S&P 500 has traded in a 9.7 percentage point range year-to-date, its narrowest range for comparable periods since 2017. With the index now at around 4,133 and about 16% above its October lows, technicians see evidence it can extend its gains.”This market is probably going to be stronger than a lot of people think,” said Craig Johnson, chief market technician at Piper Sandler. Johnson, who has a year-end S&P 500 target of 4,625, is encouraged by the reversals in downtrends for many U.S. stock indexes. In another bullish sign, the 50-day moving averages for several indexes are trading above their 200-day averages, signaling strength for the intermediate-term, he said. GRAPHIC: Trend is a friend https://fingfx.thomsonreuters.com/gfx/mkt/zgvobzwejpd/Pasted%20image%201682023246352.png Many technicians also say the market’s year-to-date resilience bodes well for stocks. The S&P 500 has traded higher 83% of the time for the full year, returning an average 13.73%, when it hasn’t dropped below the preceding year’s December low in the first quarter, a Piper Sandler analysis showed.Paradoxically, some technical analysts are also heartened by the amount of pessimism remaining in the market, believing good news can push sidelined investors into stocks – a dynamic that drove several sharp rallies last year. Sentiment in a Bank of America (NYSE:BAC) (BofA) survey of global fund managers dipped to its lowest level this year in April, a development the bank said was “contrarian supportive for risk assets.” Deutsche Bank’s measure of equity positioning for various types of investors remained well below neutral last week. “Broader institutional positioning is still very bearish,” Fundstrat’s Newton said. “For me, that is a very big positive.” Not all technical indicators are rosy, though. A recent JPMorgan (NYSE:JPM) report noted the market’s “underwhelming breadth,” with this year’s gains mostly driven by a handful of megacap stocks.NOT SO FAST There is also less optimism on the other side of the spectrum. Patrick Kaser, head of the fundamental equity team at Brandywine Global, is preparing his portfolios for a potential U.S. recession by reducing exposure to economically-sensitive sectors such as financials and industrials. While the market has lately tended to rally on bad economic news on expectations it could lead the Fed to cut rates sooner, Kaser believes investors will eventually see weak data as evidence of an approaching recession that could hurt stocks.”The market … doesn’t appear to be pricing in earnings declines and higher unemployment” that would accompany a recession, he said.The first batch of first-quarter corporate results have been mixed, with disappointing reports from Tesla (NASDAQ:TSLA) Inc and AT&T (NYSE:T) and upbeat numbers from several financial behemoths including Bank of America.David Lefkowitz, the head of equities Americas at UBS Global Wealth Management, is worried about valuations. The S&P 500 is trading at about 18 times 12-month forward earnings estimates compared to its long-term average P/E of 15.6 times, according to Refinitiv Datastream. “The risk/reward doesn’t look great,” said Lefkowitz, who has a year-end target of 3,800 for the index. GRAPHIC: Stocks get pricier https://fingfx.thomsonreuters.com/gfx/mkt/gkplwamygvb/Pasted%20image%201682024169388.png Analysts at JPMorgan sounded a similar note.“Even in an optimistic scenario of soft landing … equity upside is likely less than 5% and that is the return that is delivered by short-term fixed income,” they wrote in a report earlier this week. “On the downside, even a mild recession would warrant retesting the previous lows and result in 15%+ downside.”Meanwhile, BofA’s survey showed a near-peak 86% of investors bracing for “stagflation” – a blend of weak growth and inflation that has hurt asset prices in the past.Even some bullish investors are prepared for rough seas as markets digest earnings and await the Fed meeting on May 1-2. Nancy Tengler, chief investment officer for Laffer Tengler Investments, has recently added to positions in companies including Microsoft (NASDAQ:MSFT) and Adobe (NASDAQ:ADBE).”It could be pretty choppy,” she said, referring to the market’s performance into May. “Then we begin phase two of working our way out of this bear market.” More

NEW YORK (Reuters) – A blistering rally in megacap growth and technology shares has buoyed markets this year, and earnings reports in coming weeks could help investors determine if those gains are justified.U.S. technology stocks are currently the “most crowded” trade in the market, fund managers surveyed by BofA Global Research said, as investors pile into megacaps thinking the Federal Reserve will soon stop tightening monetary policy and that the sector will remain resilient as growth slows.Rallies in stocks such as Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA) Inc have helped sustain broader indexes in the face of recession worries and last month’s banking crisis sparked by the collapse of Silicon Valley Bank and Signature Bank (OTC:SBNY).Apple and Microsoft, up 27% and 19% this year, respectively, together accounted for nearly half of the S&P 500’s total advance through March, according to S&P Dow Jones Indices. The index is up around 7.5% year-to-date.Whether that rally continues could depend on companies beating already-lowered first-quarter estimates. Technology earnings are seen falling 14.4%. Communication services companies, including Meta Platforms Inc (NASDAQ:META) and Alphabet (NASDAQ:GOOGL) Inc, are expected to post declines of 12%, according to Refinitiv data.After steep declines in 2022, “this is a group that was an underweight for a number of people and now you’re seeing some of the momentum take off,” said Jason Draho, head of asset allocation Americas at UBS. Earnings will show “whether this is really a safe haven if you are worried about recession.” Alphabet and Microsoft are expected to report their results on April 25, followed by Apple on May 4. Amazon (NASDAQ:AMZN), part of the consumer discretionary sector, is expected to announce results on April 27. Tesla shares fell nearly 10% after missing earnings estimates on April 19. GRAPHIC: US tech stocks regain some lost ground https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/znvnbjybgvl/chart.png Companies will likely use earnings reports over the next several weeks to announce further plans for layoffs, which could bolster margins ahead of a recession and make their shares more attractive, said Robert Stimpson, co-chief investment officer and portfolio manager for Oak Associates Funds.Alphabet in January announced 12,000 job cuts, followed by Amazon in March with 9,000 cuts, and others that bring the total to 27,000 layoffs over recent months. “Tech corrected very hard last year and it’s already discounted for some sort of recession, given that it has accepted that it has to cut headcount and retrench a little bit,” said Stimpson. “It’s an industry that is accepting its medicine.”Stimpson is overweight technology and cutting back on his energy exposure in anticipation of a recession.However, signs of improving profitability could power “another leg up” in the rally, said Tom Plumb, portfolio manager of the Plumb Funds, who has large positions in Nvidia (NASDAQ:NVDA) Corp and Apple. Nvidia shares are up more than 90% this year. “We paid the penalty for holding on to a number of these stocks last year,” Plumb said. “In today’s market growth is something that people think will be a challenge and if you can identify growth you’ll be rewarded.” Still, gains could fizzle if the Fed does not cut interest rates this year, as widely expected. While the central bank has projected borrowing costs will stay around current levels until year end, investors are pricing rate cuts after the summer. Elevated rates would likely weigh heavily on technology valuations, which have soared since the year began, said Max Wasserman, senior portfolio manager at Miramar Capital. Growth stocks are especially vulnerable to high borrowing costs, which threaten to erode the value of their longer-term cash flows.Apple is trading at a forward price-to-earnings ratio of 26.5, while Microsoft’s ratio is 27.4, compared to 18 for the S&P 500. “You’re seeing extremely high multiples in a rising interest rates environment because the market is betting the Fed will reverse its policies,” he said. “We think it’s a faulty assumption and the risk-reward is not in your favor.” More