Displaying items by tag: fed

(New York)

There has been A LOT of talk lately about a bond bear market. The idea is that rates are now in a secular rising cycle led by a hawkish Fed and rising inflation. The issue with that view is two-fold. Firstly, the bond market “experts” calling for the bear market are well-served if it comes true because of the strategies they use. And secondly, there isn’t really evidence of much inflation and the Fed is not looking overly hawkish. The one really worrying thing is that the economy has been performing well, which does lend itself to rising rates and more money flowing into risk assets.

FINSUM: We think all these worries are premature. We have a new Fed chief coming in which now one is sure about, and there just isn’t much inflation. Plus, there are tens of millions of people retiring who will need income investments.

(Washington)

Okay we have a major call to make today, and it could go well, or it could get ugly for us. Our contention is that despite fears of jumping inflation and growth, we believe rates and yields are going to rise only slowly. New Fed commentary shows that the central bank does not expect the new tax policy to significantly affect growth, which makes us feel they will lean towards dovishness. Additionally, with inflation remaining subdued, we think they won’t be under a great deal of pressure to hike. Finally, on the yields front, we expect that retiree demand for fixed income will keep a lid on yields. As proof, just look at how stock funds have seen three years of outflows, while bond funds have risen for over a year straight.