Bond exchange traded funds strengthened on Monday as U.S. markets tumbled amid concerns over rising COVID-19 Omicron cases and a setback in President Joe Biden’s Build Back Better bill.
The resurgence in global infections of the more transmissible Omicron coronavirus variant have fueled volatility in financial markets as many European countries and the United Kingdom warned of potential restrictions during the Christmas holiday season, Reuters reports.
“Typically what happens in Europe is a bit of a preview for what we see in the United States. So, if we see a lot more infections in the U.S., it could stress hospitals, make people less reluctant to get out, spend, and partake in the economy. That’s definitely a cause of concern,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told Reuters.
This pressure on the growth outlook comes after the Federal Reserve signaled last week that it will begin tapering its pandemic-era stimulus more quickly and execute at least three 0.25% interest rate hikes by the end of 2022.
“So we could be seeing a little bit of downward pressure on growth forecasts for next year and as a result, we may be seeing some of that reverberate through the market as well,” Charlie Ripley, senior investment strategist for Allianz Investment Management, told Reuters.
Further weighing on risk sentiment, Senator Joe Manchin stated that he would not back his party’s roughly $2 trillion fiscal spending package, potentially putting an end to the centerpiece of Biden’s economic agenda.
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