Highlights Chart 1Too Close For Comfort The Fed is in the midst of tightening policy, but with inflation still below target it wants to ensure that overall policy settings remain accommodative. In the language of central…
Highlights Near record high levels for stocks are not an impediment to gains in the stock-to-bond ratio in the next 12 months. Minutes from June's FOMC meeting confirmed that policymakers agree that monetary policy should continue…
Highlights Chart 1Too Pessimistic On Growth Treasury yields bounced sharply last week and the yield curve steepened. As a result the Bloomberg Barclays Treasury index posted a negative return in June, only the second month of…
Highlights Fed Policy Loop: Low inflation is preventing rate hike expectations from being revised higher, prolonging the current rally in spread product. We expect rate hike expectations to move up as inflation recovers, eventually…
Highlights Chart 1Something's Got To Give Last Friday's disappointing employment report reinforced the bond market's recent strength. The 10-year Treasury yield reached a new 2017 low of 2.15%, the 10-year TIPS breakeven…
Highlights Politics will inject further volatility into risk assets, but stocks will outperform bonds and cash on a 6-12 month horizon. The health of the economy and earnings matter more than Trump's political woes for investors…
Highlights Chart 1Rate Hikes Lagging Wage Growth Last Friday's GDP report showed that the U.S. economy grew a meagre 0.7% (annualized) in the first quarter of 2017, well below levels necessary to sustain an uptrend in…
Highlights High Conviction Views: The global cyclical backdrop remains negative for government bond markets, and the recent declines in yields will not be sustained. We continue to recommend a below-benchmark overall duration stance,…
Highlights Duration: Bond market positioning is no longer at a bearish extreme and the economy is quickly approaching full employment. We expect Treasury yields will soon break through the upside of their post-election trading range.…
Highlights Chart 1Is Inflation Heating Up? In past reports we have argued that as long as inflation (and inflation expectations) are below the Fed's target, then the "reflation trade" will remain in vogue. In other…