What is the Biggest Risk Right Now for Investors? What is the Biggest Risk Right Now for Investors? The risk of a Fed policy error The probability of a Fed rate cut in July 2019 is now 84.6%. Image: Bloomberg
Decomposing the U.S. 10-Year minus 3-Month Treasury Yield Spread since 2013 This great chart shows that the “Global Economic Data” variable has a significant impact on the U.S. 10-year minus 3-month Treasury yield spread since 2018. An R² of 0.902 means that more than 90 percent of the variance in the U.S. 10-year minus 3-month Treasury yield spread…
Is Trump Right to Criticize Powell? We don’t think so, because: – Interest rates are still near zero in real terms and below real GDP – The rise in Fed rates has very few visible negative effects in the USA – And at full employment, GDP returns to the level of potential GDP
U.S. 10-Year Treasury Yield Since 1790 Factors like inflation, economic growth, and the Fed’s monetary policy can all impact the trajectory and duration of the U.S. bond bear market. Image: BofA Global Investment Strategy
Inflation – U.S. CPI Forecasts If the Federal Reserve is done with rate hikes, the U.S. headline CPI is expected to remain well above the Fed’s 2% inflation target. Image: BofA Global Investment Strategy
Inflation – Potential Paths for Core CPI Will U.S. core CPI remain well above the Fed’s 2% inflation target, if the Federal Reserve is done? Image: BofA Global Investment Strategy
Contributions to Core PCE Inflation U.S. core PCE inflation forecasts suggest that the Fed’s first rate cut could take place in 2024 Q2. Image: Goldman Sachs Global Investment Research
U.S. Government Total Outlays U.S. federal government spending is soaring. Image: BofA Global Investment Strategy
Money Market Fund Assets The prior two surges in U.S. money market fund assets, in 2008 and 2020, the Fed cut interest rates. Image: BofA Global Investment Strategy
Where Do You See S&P 500 at Year End? Could the S&P 500 end the year higher than its current level, due to the combined effects of the Fed pausing and strong corporate earnings? Image: J.P. Morgan