To judge by the action in some foreign markets, Donald Trump’s election is pricing in economic winter.

The macroeconomic overview presents ambiguity. In the face of U.S. elections, falling rates, and a host of trends that could shape the market, investors need to find a smart approach.

Following the September FOMC meeting’s much ballyhooed 50-basis point (bps) rate cut, the voting members scaled back and reduced the Fed Funds by 25 bps this time around.

While the primary focus for the financial markets has been on the continued resilient U.S. economy and what the current Fed rate cut cycle will ultimately look like, there has been another topic that has been making the rounds in the bond arena: the budget deficit.

The U.S. election outcome is anyone’s guess, so let’s try to game out the winners and losers from the candidates’ major policy proposals.

The Fed’s “recalibration” of monetary policy is more than just about shifting to rate cuts. It also involves where the policy maker is now placing its greater emphasis on setting the course for easing in the future. Rather than inflation being the primary driver in the decision-making process, labor market activity has now taken center stage, and with that, one could argue, for the Fed, it’s now about the economy.

In the span of a few days in late July, the market got live to two contrasting theories at once: that U.S. inflation is collapsing while Japanese inflation will remain stubbornly high.

After much anticipation, the Fed finally delivered a rate cut at the September FOMC meeting. The amount had been the subject of a great deal of speculation of late, and the voting members decided on a half-point reduction to kick off this easing cycle, bringing the new Fed Funds trading range down to 4.75%–5%.

Post-Jackson Hole and now post-jobs report, the markets can settle in for a rate cut at next week’s FOMC meeting.

With Labor Day now in the rearview mirror, the money and bond markets will no doubt become laser focused on the September FOMC meeting. Yes, Fed Chair Powell telegraphed that a rate cut is forthcoming, but he also emphasized how monetary policy is still data dependent.

Is the Japanese yen carry trade back on? Tough question. We think it is, now that the Bank of Japan has toned down its hawkish rhetoric. More on that later. Still, even if we are wrong, the reality is that the market will be talking about the violent ructions of August 2024 for the rest of our careers.

The recent U.S. Treasury yield rally is compared to a similar rally in Q4 2023, driven by expectations of a shift in Federal Reserve policy.

The financial markets appear to be rather confident the Fed will finally begin its rate cutting process at the September Federal Open Market Committee meeting, at a minimum. The debate has now shifted as to what this easing cycle will ultimately look like.

Once again, the Fed kept rates unchanged at the July FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25%–5.50% band that was introduced exactly a year ago and still resides at a more than 20-year high watermark.

The big story making the rounds this summer is the spike in the small-cap Russell 2000 since the release of the latest Consumer Price Index (CPI) report, which shocked the market by printing 0.0% month-over-month in June.

The UST yield curve has been inverted, but there is speculation about when it will “un-invert" and move out of negative territory.

The outlook for the Federal Reserve (Fed) through the first six months of 2024 has been a bit of a roller-coaster ride to say the least. While one could argue the overarching premise has been for rate cuts, it has certainly not been a smooth ride.

Remember when an inverted yield curve used to predict recessions? Here we are about two years removed from the Treasury yield curve moving into negative territory, and the U.S. economy has yet to move into recession territory. The economy’s resilience has certainly been a surprisingly welcome development and has left many a market participant wondering what happened.

Is the labor market okay? Depends on who you ask. The answer to that question should be a strong guidepost for whether you like Consumer Staples relative to the broad market.

Once again, the Fed kept rates unchanged at the June FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25%–5.50% band that was introduced in July last year, and still resides at a more than 20-year high-water mark.

Here we are through the first five months of 2024, and you could say the more things change, the more they stay the same. What exactly do we mean, you might ask?

While the money and bond markets continue their Fed-watch saga, there is one constant that we have been emphasizing for the fixed income landscape: a new rate regime.

There is no question that Fed policy remains the primary force driving the money and bond markets for the third year in a row.

The consensus has egg on its face with respect to Chinese stocks. It wasn’t supposed to be this way. Entering this year, one of the big concerns—and the primary reason for China’s ugly multi-year bear market—was the country’s destiny with a “4-handle” on gross domestic product (GDP) growth.

It seems that every few years, the term “stagflation” gets floated around to describe the current and/or prospective U.S. macro landscape.

Join the thought leaders at WisdomTree to learn all about strategies catered to meet this market moment.

Once again, the Fed kept rates unchanged at the May FOMC meeting. As a result, the Fed Funds trading range remains in the 5.25% to 5.50% band introduced in July 2023 and still resides at a more than 20-year high-water mark.

I have never come anywhere close to running a marathon of any sort. I am told the last mile could be the most difficult part of the endeavor.

Join VettaFi and WisdomTree's thought leaders for a discussion on those and other critical issues, and help advisors respond to client questions and concerns about their wealth.

Join the thought leaders at WisdomTree and VettaFi for a robust discussion about the challenges and opportunities available in the fixed income space.

Today’s inflationary market landscape is fraught with risks for investors. Despite these circumstances, Scott Welch and Kevin Flanagan outline how bond investors can generate yield.