Labor Market
The Fed will keep rates on hold until the unemployment rate forces its hand.
The Fed held rates steady for a fifth straight meeting, with a divided FOMC and resilient growth keeping policy on hold, supporting our long-duration stance. The target range remains at 4.25%–4.50%, with the statement reflecting only a modest downgrade to the…
The June JOLTS report showed further weakening in US labor market momentum, reinforcing our overweight duration stance and preference for steepeners. Job openings fell more than expected to 7.4m from a downwardly revised 7.7m, while quits declined to 3.1m and…
The July Conference Board Consumer Confidence report showed improved expectations but weaker current conditions, reinforcing our defensive stance and preference for downside protection. The headline index rose to 97.2 from a revised 95.2 on the back of better…
The July Dallas Fed survey beat expectations, pointing to a rebound in current activity, but the outlook remains subdued, supporting our modestly defensive asset allocation. The headline index rose to 0.9 from -12.7 in June, with production jumping 20 points…
Investors should anticipate above average Treasury returns during the next 12 months, and curve steepeners will continue to profit.
Rising political pressure on the Fed risks undermining policy credibility, risking a de-anchoring of long-term inflation expectations. The Trump administration keeps escalating attacks on Fed Chair Powell. While the Fed cannot ease proactively amid…
Consumer sentiment improved modestly in July, but remains at levels that still point to subdued spending, reinforcing our defensive stance. The preliminary University of Michigan index rose to 61.8 from 60.7 in June. Expectations edged up to 58.6, while…
The fact that the US economy has been slower to deteriorate than in past cycles is entirely consistent with our kinked Phillips curve framework. We will be looking to our MacroQuant model for guidance on when to turn fully defensive.
Jay Powell won’t be removed as Fed Chair before the expiry of his term next May, but we will learn the identity of his replacement this year, setting up a potentially awkward “shadow Fed Chair” situation.