It wasn’t too long ago that you could confidently proclaim that most of the Street was ebullient, maybe even wildly so, with respect to the greenback’s prospects.
For the fourth meeting in a row, the Federal Open Market Committee (FOMC) decided to keep rates unchanged, leaving the Fed Funds trading range at 4.25%–4.50%.
In the current land of uncertainty the markets and investors find themselves in, the monthly Employment Situation report is ‘must-see TV’ and will remain that way for the foreseeable future.
With tariffs toggling on and off and a major tax bill still in flux, investors should brace for headline-driven volatility through July, particularly around trade and fiscal policy.
Remember last July and August when the yen carry trade blew up? At the time, the central bank surprised the market by signaling a faster pace of rate hikes than expected. Investors sold foreign currency, bought back yen and sent markets into a tailspin.
What investors thought was going to be a nice start to a weekend in May got turned around with a late Friday announcement that Moody’s had just downgraded the U.S. long-term credit rating.
After a brief reprieve from all the recession talk while the Fed was raising rates to decades-old high watermarks, the ‘R’ word has come back into vogue once again post-Liberation day.
Our overarching theme for U.S. fixed income has been, and will continue to be, based on the premise that interest rates will stay at more historically “normal” levels, but that, within this backdrop, investors will face heightened volatility.
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Once again, the Federal Open Market Committee (FOMC) decided to keep rates unchanged at today’s meeting, leaving the Fed Funds trading range at 4.25%-4.50%, keeping the level for overnight money 100 basis points (bps) below last year’s peak reading.
First, let’s check the market action. Fortunately for stocks, the public has come around to a thesis that the sky is not falling, though there are a ton of market viewers who remain decidedly skeptical that the worst is behind us.
The month of April will unfortunately go down in financial market folklore as being one of the more noteworthy on record.
With the financial markets still wrestling with the tariff announcements from last week, one thing is still certain: uncertainty remains an integral part of the investment landscape.
Compensation dynamics are commanding investor attention once more. For the first time in decades, Japan's pay increases—finalized at +5.46% in this year's shunto negotiations—have notably exceeded compensation growth rates in the United States.
As the first quarter comes to a close, there is one word that has become the new go-to term to describe the investment backdrop: uncertainty.
For the second meeting in a row, the Federal Open Market Committee (FOMC) decided to keep rates unchanged, leaving the Fed Funds trading range at 4.25%–4.50%.
In the understatement of 2025 thus far, the headlines emanating from Washington, D.C., have been fast and furious. Whether they be tariff-related, involving federal government cuts or geopolitical in nature, there has been a headline for many facets that investors could think of.
One thing we have seen underscored in 2025 is that the bond market can change its mind very quickly, particularly as it relates to policy emanating from Washington, D.C. Following President Trump’s election win, the dominant theme in the U.S. Treasury (UST) arena was that his Administration’s policies would lead to higher budget deficits, increasing UST supply and, ultimately, higher rates for maturities like the 10-Year yield.
Following the relatively solid January Employment Situation report, the market’s undivided attention, at least economic data-wise, then turned to the latest CPI reading. Indeed, with the jobs aspect of the Fed’s dual mandate clearly showing no urgency to cut rates further at this time, the question then turned to the inflation portion of the policy maker’s mission.
Private credit has been one of the most talked-about segments in fixed income markets over the last few years.
There weren’t too many market observers who penciled in higher tariffs on Canada than on China, but that’s where things stood, at least for a few hours, before Trump struck a deal with Prime Minister Justin Trudeau yesterday.
The first month of 2025 is now in the rearview mirror, and investors recently experienced a fortnight (14 days) of headline-making activity, ranging from President Trump taking office, the January FOMC meeting, and of course, the developments surrounding the DeepSeek news.
For the first time since the Fed began cutting rates at their September FOMC meeting, the voting members decided to keep rates unchanged to begin 2025.
When investors have been looking to allocate funds within the U.S. fixed income markets, credit has seemingly been viewed as being perhaps too “rich,” or expensive, in relative terms.
All of the attention when it comes to future Fed monetary policy decisions has been laser-focused on rate cuts. We would have to concur, and rightfully so. However, that doesn’t mean investors should take their eyes off the ball and not consider the Fed’s balance sheet.
As we enter 2025, there has been a lot of conjecture about a return to the 5% threshold.
While the market has largely moved past that year’s recession debate, it’s worth noting that the traditional definition that persisted for all our careers—two consecutive quarters of negative GDP growth—did occur in the first half of 2022.
As expected, the Fed delivered a 25-basis point rate cut at the December FOMC meeting, but what comes next is far from clear. Kevin Flanagan explains why future rate moves depend on shifting economic signals and why the Fed’s definition of “neutral” may be evolving.
A couple of weeks ago, we wrote about how the deficit had come back into focus for the U.S. financial markets.
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?
