To argue that the U.S. consumer has remained resilient has become a cliché and at the same time an understatement. After a very strong increase in real incomes during the pandemic, real income growth started to slow considerably.

Investors are beginning to price in a 'soft landing' as the base case over the next 12 months. This is evident across a number of indicators.

The financial markets, investor opinions, and world events have been all over the place – so bear with me this morning as I am going all over the place with a variety of year-to-date observations and comments.

Our forecast for the federal funds rate has the Federal Reserve (Fed) starting to cut rates in July 2024, with a second rate cut before the end of 2024.

For much of 2023, the market has tried to anticipate a Fed pivot – only to be wrongfooted several times. However, sharply higher interest rates, cooling inflation pressures and moderating wages have the market convinced that the Fed’s current tightening cycle is over.

Drew O'Neil discusses fixed income market conditions and offers insight for bond investors.

Doug Drabik discusses fixed income market conditions and offers insight for bond investors.

October news on CPI inflation was all the doctor recommended and has markets spinning and repricing the Federal Reserve’s (Fed) potential path forward.

Following the surge in inflation, the most aggressive Fed tightening cycle since the 1980s and multi-decade lows in business and consumer confidence, calls for a U.S. recession have been prevalent all year.

We understand that many economists/analysts/market participants are already discounting inflation as a serious problem for the U.S. economy. Even if this seems correct on the surface, the problem is very different for those who suffer the most from higher prices – middle- and lower-income individuals.

Good news – the earnings recession is over! After three consecutive quarters of negative earnings growth, 3Q S&P 500 earnings are on pace to climb 5% YoY. If sustained, this would be the best quarter of earnings growth since 2Q22.

The 2- through 30-year Treasuries rallied hard to drop yields from 12 to 18 basis points. By example, the 10-year Treasury price bottomed out at $91.86 (4.93%) and peaked at $95.25 (4.48%). This is a 3.4-point price swing or 45 basis point drop in yield.

After the October/November meeting, it seems that Fed officials have an added objective, as Fed Chair Jerome Powell said during the press conference that they needed to see interest rates “persistently high.”

The Federal Reserve (Fed) elected to not raise the federal funds rate at the October/November 2023 Federal Open Market Committee (FOMC) meeting.

While 3Q23 growth showed the economy expanded at a 4.9% annualized rate, it is important to remember that the GDP report is backward-looking.

Yields are at some of their highest levels in over a decade. This means that if you own fixed income in your portfolio, there is a good chance that you are seeing unrealized losses on your monthly statements (fixed income math = yields higher, prices lower).

Chief Economist Eugenio J. Alemán discusses current economic conditions.

Much like Halloween, it has been a scary time for investors.

Higher for longer. The Federal Reserve will likely maintain higher interest rates and remain open to another rate hike. Borrowing costs for households, businesses and governments have risen with soaring rates.

The strength in consumer demand has been one of the defining characteristics of a very resilient U.S. economy and September’s retail and food services sales report confirmed that the U.S. consumer is alive and well.

I was asked a pretty good question following an internal meeting late last week. The question started out by noting that we have been promoting going longer on the curve for a while now and then asking why we think longer-term rates will come down.

With next week’s 3Q GDP report shaping up to be a blockbuster number (the Atlanta Fed GDPNow is tracking a +5.4% growth rate), it is worthwhile to reiterate our thoughts on the economy and how we expect growth to unfold over the next year.

We hear and read daily analysis on how inflation is coming down and that the Federal Reserve (Fed) has beaten inflation. This is probably very close to the truth from an economics point of view.

As a strategist, I work with financial advisors every day creating custom fixed income portfolios based on client’s financial needs and goals – with a keen eye on the importance of a balanced portfolio.

The Federal Reserve (Fed) only controls one rate of interest, and it is a very short-term rate called the federal funds rate, the rate that banks charge each other for overnight, intra-bank loans.

The recent repricing in longer-maturity yields has pushed the 10-year Treasury yield to levels not seen in 16 years.

When the media speaks of the yield curve, they are likely referring to the Treasury yield curve. It is the point of reference for interest rate levels and investment comparison.

As heightened inflation has lingered, the Federal Reserve diminished hopes of 2024 interest rate cuts and economic data suggests a mild recession in the first half of 2024.

Investors had gotten used to smooth sailing with the economy remaining resilient, the equity market soaring double digits, and volatility remaining (mostly) subdued.

While government shutdowns impact the economy directly and indirectly, the magnitude of the impact is determined by the length and scope of the shutdown. Some operations can continue in a “partial shutdown” scenario, and thus impact the economy differently.

Inflation has declined considerably from last year’s peak of ~9.0% to ~3.7%. However, policymakers still think they have more work to do and have signaled that one additional rate hike is likely.

Downside equity market volatility can be unsettling, but it is important to put the pullback in perspective and identify the drivers of the negative market reaction. First and foremost, the equity market was due for a modest pullback.

Anyone who even casually pays attention to the financial media has likely become familiar with the current state of inflation as well as how high interest rates have risen over the past ~2 years.

Wednesday’s Federal Reserve (Fed) decision to keep the federal funds rate unchanged wasn’t a surprise at all. Markets, as we argued last week, had predicted that the Fed was going to stay put and that is what it did.

While our Washington Policy analyst believes there is a path to a resolution to avoid a government shutdown ahead of the looming September 30 deadline, the rhetoric out of Washington suggests otherwise.

For the second time in four months, the central bank decided to not increase interest rates but indicated another hike in 2023 is likely.

Inverted curves (when the gold line goes below the red line meaning that short maturity yields are higher compared to longer maturity yields) have preceded recessions.

Markets are convinced that the Federal Reserve (Fed) is going to pause its interest rate campaign after it finalizes its Federal Open Market Committee (FOMC) meeting on Wednesday, September 20.

The Energizer Bunny! That’s the term that best describes the U.S. economy.

If held until the bond is redeemed (either by call or maturity), the annual yield earned for the life of a bond is known upfront at the time of purchase. Knowing the return on an investment upfront makes long-term financial planning a much easier task.

For the savvy private wealth investor, portfolio diversity is key to success. Investing in infrastructure is one option that can help you both optimize your portfolio and make a positive and meaningful impact on your local community.

There has been lots of speculation lately regarding China’s economic “decline” or potential economic “perils,” so much so that newspaper articles about the coming demise of China’s miracle economic growth over the previous decades continue to take (our) time away from other, perhaps, more important topics.

When you step back and think about it, it is hard to believe that this hugely important retirement benefit has only been around for just over 40 years.

In general, portfolios can be split into growth assets and principal protecting assets. Growth assets tend to have greater risk coupled with greater income/reward.

Last week we changed our economic forecast because the economy has remained stronger than we expected. We delayed the start of the recession to the first quarter of 2024 rather than the last quarter of 2023.

A steady stream of news helped drain enthusiasm from the equities markets through most of August, snapping a five-month growth streak at a time of the year known for cool market performance despite the swelter of its dog days.

While the S&P 500 delivered solid performance this summer, we remain cautious in the near term given the Index remains modestly above our year-end target of 4,400.

Sometimes things sound the same, look the same, or feel the same – but they are not. It doesn’t necessarily mean one is better or worse than another but uniquely dissimilar and serving, unlike purposes.

It’s hard to see your portfolio dip and not panic – especially as you near retirement. Coupled with record inflation, a dip might tempt you to sell your investments to drive cash flow.

Watching coverage of the BRICS (Brazil, Russia, India, China and South Africa) summit in South Africa this week made us wonder why the members of the BRICS decided to name the section, in which Vladimir Putin was addressing the conference by video conference, “BRICS BUSINESS FORUM,” in English, yes?