Highlights Yield Curve Drivers: A rebound in rate hike expectations will cause the curve to steepen somewhat during the next few months, though accelerating wages limit the upside. The yield curve will not invert until after long-dated…
Highlights Chart 1Checklist To Buy Credit The sell-off in spread product continued through the holiday season, but with spreads now looking more attractive, it is time to consider increasing exposure to corporate credit. Much…
Highlights Investors ran for cover in December as they succumbed to a litany of worries regarding the outlook. The key question is whether the pessimism is overdone or an extended equity bear market is underway. Our outlook for the U.…
Highlights Differences of opinion are what make a market, and we’ve got a big one when it comes to the Fed: The money market says the fed funds rate goes no higher than 2.75%; BCA says 3.5% by the end of 2019, and possibly 4%…
Highlights Late-cycle pressures will keep pushing bond yields higher. Global growth will remain above trend in 2019, keeping unemployment rates low and preventing central banks from turning dovish. The unwind of crisis-era global…
Academic studies have highlighted the importance of the yield curve as a leading indicator of recessions. In fact, every U.S. recession since the mid-1960s has been preceded by an inverted yield curve (see chart). There has only…
The yield curve tends to flatten during rate hike cycles. Most of the flattening comes from the upward pressure on yields at the front-end of the curve (i.e., short rates) as the Fed steadily pushes rates up. In the current…
The yield curve is a powerful forecasting tool of recession and associated bear markets because it reflects the bond market’s thinking on whether the economy in the future can tolerate current short rates. Policy rates…
Highlights Deep-seated economic and political forces will undermine the trade truce between China and the United States. U.S. economic momentum is strong enough to allow the Fed to deliver more rate hikes next year than what the…
Highlights Duration: The waning impact from fiscal stimulus and the drag from weak foreign economic activity will cause U.S. growth to slow as we enter 2019. But with market-implied rate hike expectations still depressed, we are…