The stock market has been on a remarkable run recently, with the best being seen in growth stocks. While this surge has been exciting for anyone invested in these shares, it has caused some to worry that the Federal Reserve may be forced to act.
That’s because the surge in growth stocks has the potential to cause unwanted inflation, which could push interest rates higher and make it more difficult for businesses to finance expansion and hire additional staff.
The most notable growth stocks have been in the technology arena, with the likes of Tesla, Apple, Amazon, and Microsoft all experiencing meteoric rises. Other notable sectors that have seen surges in stock prices have been travel, retail and communications.
Despite the panicked speculation about the Federal Reserve taking action, it seems that the central bank isn’t too concerned about the current situation. Last week, Fed chairman Jerome Powell stated that he was “not too worried” about the current stock market trajectory, and that the central bank had enough tools at its disposal to deal with any potential issues.
While Powell’s comments have provided some value to stock investors who were worried about the future, there’s still a need to consider how long growth stocks can continue to rise before a tipping point is reached. If the ongoing bull market turns into a bubble, then it could really spell disaster for the stock market as a whole.
Ultimately, investors should be reminded that stock markets are ultimately unpredictable, and anyone thinking about investing should ensure that they diversify across different sectors and minimize their overall risk. It’s clear that the current surge in growth stocks isn’t sustainable in the long term, but only time will tell if the Federal Reserve needs to step in.