Concerns Emerge Over Fed Exit

The head of Denmark’s biggest pension fund says his main concern now is how to ride out what may turn into a simultaneous slump across asset classes as central bank liquidity is withdrawn.

“My concern is how the underlying assets perform,” Carsten Stendevad, who oversees $113 billion as chief executive officer of ATP, said yesterday in a phone interview. “The historical risk diversification has to some extent been suspended because central bank liquidity has inflated asset prices. That made all assets rise simultaneously. Now, they may all deflate simultaneously.”

The U.S. Federal Reserve confirmed this week it will end its asset-purchase program amid signs the economy is strengthening. The news sent U.S. stocks and bonds lower while gold prices headed for the biggest drop in three weeks. The main challenge for investors is working out how to hedge against losses as traditional risk models provide little help in navigating the Fed’s exit, Stendevad said.

Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.