Brian Smedley, Guggenheim’s Chief Economist and Head of Macroeconomic and Investment Research, discusses the impact of the Fed’s 0.75% rate hike on markets and the economy.
The risks of tightening into a downturn.
The spike in core CPI is a one-time adjustment as the economy reopens.
Fed Chair Jay Powell is giving conflicting guidance to bond investors.
Guggenheim’s macroeconomic team is predicting a recession by mid-2020. We discuss the underlying drivers of this forecast, the steps the Fed can take to address a weakening economy, and how advisors should allocate for the period ahead.
The Macro Outlook webcast featuring Brian Smedley, Head of Macroeconomic and Investment Research, will analyze a wide range of economic and market data that can help advisors navigate through a possible turning point in the business cycle. The following timely questions will be addressed: Will the Fed’s dovish pivot extend the expansion? Can we trust the recessionary signal of an inverted yield curve, or is it distorted by QE? When will the next recession begin, and how severe will it be for the economy and for markets? How should investors position in this environment?
This webinar will cover:
New developments in fiscal policy, the labor market, and the neutral interest rate suggest that the expansion could extend into the latter half of our recession range.
As the Federal Reserve (Fed) tightens monetary policy further, we expect to see default rates higher next year. Loan recovery rates averaged 70 percent between 1990 and 2017 as a result of their secured status and seniority in the capital structure. Senior secured bond recovery rates averaged 58 percent over the same period, while senior unsecured bond recovery rates averaged 43 percent. We are concerned about distressed exchanges as the risk of re-default is high. About 7 percent of high-yield corporate bond issuers have defaulted in the past.
The business cycle is one of the most important drivers of investment performance. As the nearby chart shows, recessions lead to outsized moves across asset markets. It is therefore critical for investors to have a well-informed view on the business cycle so portfolio allocations can be adjusted accordingly.