Approaching the second half of 2024, the resilient US economy has exceeded expectations while inflation has stalled—at least temporarily. As a result, expectations for rate cuts have shifted meaningfully from the beginning of the year, in turn impacting both capital markets and real asset activity. Read more here: https://hubs.la/Q02zYRDy0
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A more resilient than expected US economy is one of drivers of the recent surge in long-dated US Treasury yields. Our research team explains in this report, pointing out that overshooting yields could set off market volatility in the near-term.
Investment Strategy: Effects of rising US treasury yields | Bank of Singapore
bankofsingapore.com
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Managing Director, Research & Strategy at American Realty Advisors | GlobeSt 2022 Woman of Influence
The macro context heading into 2024 continues to hinge on the trajectory of inflation and Fed policy response to it. Much of the current commentary is focused on outlining the cyclical improvement in price growth over the next 6-12 months. But we feel this perspective captures just the first of what is likely to be a two-phased inflationary regime that will have implications for investors across asset classes. While it’s true that many of the short-term contributing factors are driving relief in inflation, there is the potential for a resurgence that is being overlooked. Particularly noteworthy is that what could drive prices back up are largely forces that are structural, i.e.stickier and less sensitive to economic cycles –elements such as a growing undersupply of labor, de-globalization, costs associated with green transitions and high levels of low-yielding government debt maturing. At the same time, GDP growth (both realized and potential) has been generally trending downward over the last several decades, which complicates the Fed’s ability to navigate these inflationary periods without throwing things into reverse. We think this interplay is going to create a cycle whereby Fed policy intervention, both cuts and hikes, increases in frequency and contributes to elevated volatility compared to what many grew used to over the last 20-30 years. To find out how we’re translating this into strategy, check out our latest House View, available via our website or through the link below. https://lnkd.in/ebm6K77n
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SO WE MAY EXPECT US DOLLAR TO STAY STRONG Fed may be less inclined to cut rates quickly unless the economy shows severe signs of strain. Current data does not suggest an economic collapse but rather presents a different challenge — strong consumer spending and 'stickier' inflation. With consumer spending up 0.6% in July and many economists pushing back or scrapping recession forecasts, the likelihood of a Fed rate cut seems limited.
Bridgewater’s Karniol-Tambour Sees Fed Taking Longer to Cut Rates
bloomberg.com
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The bond market sustained its latest broadside from the U.S. hot economic data warship on Thursday. Not only did the advance reading for 2024 Q1 U.S. GDP come in weaker than expected, but inflation readings also came in hotter than expected. This “stagflationary” barrage was enough to propel Treasury yields to their highest levels in more than six months. As Eric Parnell, CFA examines in this week's Great Valley Advisor Group Economic and Market Report, what should we reasonably expect from bonds going forward given the already tough start to the year in 2024? https://lnkd.in/eJfRMgs5
Economic & Market Report: Bond Market Broadside
https://greatvalleyadvisors.com
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Indeed. Soaring budget deficits and investment needs mean the ‘neutral’ interest rate may be higher At issue is the neutral rate of interest: the rate that keeps the demand and supply of savings in equilibrium, leading to stable economic growth and inflation.But now, some see reasons for neutral rising, with the potential to change a wide range of asset prices. But when the Fed raised the fed-funds rates to 5.3% last year, the highest since 2001, the economy appeared to shrug it off, giving reason to think neutral might be higher. Based on the resilience of economic activity to higher interest rates, “one conclusion you could draw is that r-star must be higher. Another conclusion you could draw, which I think is totally valid based on seeing the same set of information, is that the economy is just not that sensitive to interest rates,” said Kris Dawsey, head of economic research at hedge-fund manager D.E. Shaw. There are several factors cited for why neutral may be rising: soaring government deficits and strong investment driven by the green-energy transition and an artificial-intelligence-fueled frenzy for electricity-intensive data centers. Higher productivity from AI could also lift long-run growth and the neutral rate. #interestrates #federalreserve #monetarypolicy #useconomy #deficits #economists #inflation #assetallocation #yieldcurve #producticity #ai #capitalspending
Even If the Fed Cuts, the Days of Ultralow Rates Are Over
wsj.com
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We’re adjusting to a new environment where inflation is fading but interest rates are likely to stay higher for longer, and have positioned portfolios to reflect our cautious investment outlook. Read our monthly OMPS update: https://lnkd.in/ecFp22AE
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After a tumultuous year for fixed income, government bond markets were finally delivering a story of falling inflation in Q4 2023. In our Investment Grade quarterly update, Gordon Shannon reflects on Q4, and in particular the month of December which proved to be one of the strongest months of the year, as hopes of multiple rate cuts in 2024 were accelerated. Click below to learn more. #FixedIncome #GovernmentBonds #Inflation2024
Investment Grade Quarterly Update - January 2024
am.vontobel.com
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I am competent in making myself better in the next years ahead. I am currently pursuing my Masters Degree in Early Childhood Education with 39 units already.
As the economy keeps chugging, economists are puzzling over whether years of ultra-low interest rates have drawn to a close, The Wall Street Journal's Nick Timiraos writes. The so-called "neutral rate of interest" — inferred from larger patterns of borrowing, spending and inflation — could be on its way up, mainly because current rates aren't keeping a lid on economic growth. Government deficits, big spending by retirees and business investments that depreciate far more quickly than in years past could also drive up the neutral rate. Federal Reserve Chair Jerome Powell has expressed skepticism about neutral-rate estimates, saying in December that regulators lack "a really clear and precise understanding" of the concept. Bond investors are bullish as Treasury yields grow thanks to rising interest rates and continued economic growth, the Journal notes.
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Great summary of the current economic situation…