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Today's big stories

The Federal Reserve suggested it could step up its fight against inflation
One investment manager has laid out how the various possible outcomes in Ukraine should influence your investments – Read Now
US airline JetBlue made a $3.6 billion rival offer for Spirit Airlines

Backup Plan

What’s Going On Here?

The Federal Reserve (the Fed) revealed this week that it’s planning to sell off billions of dollars of bonds – just in case interest rate hikes aren’t up to the job.

What Does This Mean?

The Fed has two main ways of fighting inflation: it can raise interest rates, or it can sell off some of the $9 trillion worth of bonds it’s accumulated – a move that drives down their prices, pushes up their yields, and increases the overall cost of borrowing. The central bank already started doing the first of the two last month, but now it’s resorting to the latter: the central bank said it could ramp up to selling $95 billion worth of bonds every month – almost twice as much as when it did the same thing in 2017. It suggested it’d be more aggressive with rate hikes too, which analysts took to mean we can expect at least two 0.5% hikes – rather than the typical 0.25% – sometime this year.

Why Should I Care?

For you personally: You have been warned.
The tech-heavy Nasdaq index fell on the news, and the message was loud and clear: tech stocks are at risk. See, investors value a stock based on what they think a company’s future profit is worth today. And since tech companies are expected to generate a higher proportion of their profits in the future than other companies, they’re the first to suffer when yields rise. Then again, you might just want to ride it out: data shows that fast-growing stocks like tech have beaten cheap-looking value stocks in three of the last four periods of Fed rate hikes (tweet this).

The bigger picture: The R word.
It’s no secret that the Fed’s efforts to limit inflation will drag on economic growth, but some economists are more pessimistic than others. Take Deutsche Bank: it said this week that it’s expecting the US economy to fall into recession next year.

You might also like: The markets that could inherit a fortune from rising interest rates.

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Analyst Take

Your Updated Guide To The Russia-Ukraine Crisis

Carl Hazeley, Analyst

What’s Going On Here?

It’s now been six weeks since Russia invaded Ukraine, and there’s no end in sight.

So investment manager abrdn – which came out with a series of potential war scenarios in February – is back with new analysis on how the crisis is likely to play out from here on.

There are some more likely possibilities: abrdn sees a 30-40% probability over the next 12 to 18 months of either ongoing conflict or an effective split of Ukraine, for example.

And then there are some wildcards, like a Russian U-turn that could come from a coup against Putin, or from the sanction-fueled collapse of the Russian military.

So that’s today’s Insight: where abrdn’s economists think the war might head next, and what each of those scenarios would mean for your portfolio.

Read or listen to the Insight here

Make that a double

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But today, it isn’t just excited about one, but three.

These are three stocks it’s handpicked that have already performed well, and that The Motley Fool thinks might have a lot further to run.

Get The Motley Fool’s special report here, and find out more about its double-down recommendations.

Find Out More