The FOMC had taken an expansionary position in April by dropping the fund rate to 0.25. We are to remain at this fund rate until 2023, when the FOMC predicts U.S. inflation will reach 2% (we are at 1.2% as of November 2020). This statement was met with glee from investors as we saw a reversal away from the downward spiral of the S&P500 (~67% upward) brought on by the panic of the evolving outbreak of COVID-19. This fund rate will keep t-bond yields relatively flat. This coupled with GDP growth will incentivize investors to continue demanding treasury bonds. The return rate of the S&P500 outpaces treasury bonds at rates of 15.61% to 7.88% YTD.
With a 9.8% average yearly return, we may see the S&P500 reach a price level of ~ 4022.52 by the end of next year.
With a 9.8% average yearly return, we may see the S&P500 reach a price level of ~ 4022.52 by the end of next year.