Central
banks
were
the
focus
of
investors’
attention
last
week.
The
Federal
Reserve
conformed
with
expectations,
maintaining
interest
rates
at
their
current
level.
In
the
accompanying
press
conference
Fed
Chairman
Jerome
Powell
encouraged
investors
to
expect
three
rate
cuts
this
year
in
line
with
current
market
expectations
(source
CME
Fedwatch).
In
contrast,
the
Bank
of
Japan
ended
its
eight-year
policy
of
negative
interest
rates.
This
represents
a
significant
policy
shift
and
reflects
the
recent
strength
in
the
economy,
higher
inflation
and
wage
settlements.
Japanese
equities
have
benefited
from
this
growth
with
the
Morningstar
Japan
index
rising
47%
over
the
last
year.
However,
this
return
has
been
diluted
for
US
investors
by
the
sharp
fall
in
the
Japanese
yen
relative
to
the
US
dollar,
providing
a
stark
reminder
that
when
investing
overseas,
we
must
take
account
of
currency
changes
as
well
as
the
prospects
for
the
companies
in
which
we
invest.
Equity
Prices
Continue
to
Rise
Despite
a
fall
on
Friday,
US
equity
prices
rose
over
the
week
with
the
Morningstar
US
Market
Index
finishing
2.31%
higher
and
9.65%
higher
for
the
year
to
date.
A
key
contributor
to
this
gain
was
Nvidia
which
rose
7.35%
as
investors
reacted
positively
to
its
developer
conference.
You
can
read
our
Morningstar
Equity
Analyst
take
on
the
Nvidia
announcements
here.
Value
Investing
Taks
Time
As
US
asset
prices
continue
to
rise
above
Morningstar
analysts’
estimate
of
fair
value,
it
is
natural
to
look
for
alternatives
that
appear
more
attractively
priced.
However,
it
is
important
to
remember
that
the
reason
some
investments
appear
attractive
is
that
they
are
behaving
differently
from
those
that
are
rising
quickly.
While
choosing
more
attractively
priced
assets
can
deliver
higher
returns
–
and
often
appears
smart
in
hindsight
–
such
assets
are
likely
to
remain
uncorrelated
in
the
near
term
and
create
considerable
regret
as
assets
one
has
sold
continue
to
rise
in
price,
while
those
that
have
been
bought
languish
or
fall
further.
Such
disappointment
can
lead
to
poor
decisions.
It
is
therefore
vital
that
investors
seeking
better
value
holdings
have
the
patience
to
overcome
this
regret
and
understand
that
market
trends
do
not
turn
simply
because
one
has
changed
one’s
mind.
Inflation
and
Fed
in
the
Spotlight
Again
This
Week
In
a
busy
week
of
economic
data,
investors
are
likely
to
focus
on
Personal
Consumption
Expenditure
(PCE)
inflation
data
on
Thursday.
This
is
expected
to
show
a
slight
fall
in
“core”
PCE
(which
removes
volatile
food
and
energy
prices)
from
0.4%
to
0.3%.
Investors
will
also
be
listening
for
confirmatory
remarks
from
the
five
Fed
Governors
and
Presidents
(including
Jerome
Powell)
due
to
give
speeches
this
week.
Signs
of
growing
concern
about
inflation
would
likely
to
have
a
negative
impact
on
asset
prices.
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