By –Mr. Subho Moulik, CEO at Appreciate
“The Federal Reserve’s decision to hold rates steady while projecting a ‘stagflation lite’ scenario of 1.4% growth and 3% inflation reveals a central bank navigating unprecedented uncertainty. With seven FOMC members wanting no cuts versus eight expecting two, the internal divisions mirror broader economic confusion. Powell’s admission that tariff impacts remain unknown essentially puts monetary policy on hold pending Washington’s trade decisions.
This cautious stance maintains dollar strength but risks falling behind the curve if either growth collapses or inflation accelerates. The Fed’s projection of missing its 2% inflation target through 2027 signals a fundamental shift from the post-2008 disinflationary environment to a new era of persistent price pressures. For Indian investors looking at US stocks, the current Fed stance and market volatility present both risks and hidden opportunities.
With US equities experiencing corrections amid tariff shocks and policy uncertainty, quality American stocks — especially those with strong fundamentals — may now be available at more attractive valuations, offering a rare entry point for long-term investors. Small-cap US stocks, in particular, stand out as a hidden gem: historically, they tend to outperform large caps following the end of rate cycles, especially in soft-landing scenarios, and their domestic focus makes them less vulnerable to global trade disruptions and tariffs. Investors should also monitor currency fluctuations, as a stronger dollar can impact rupee returns, and consider gradual, diversified allocations to manage volatility. Additionally, the broadening of US equity market leadership beyond the Magnificent 7 and into sectors like AI enablers and small caps could reward active, research-driven strategies. For Indian investors, this is a moment to look beyond headline risks and seek out underappreciated segments of the US market poised for a rebound as policy clarity emerges.”
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