A lot was going on with rates in 2023, yet, at the end of the year how different were things? The 10-year Treasury yield's lowest closing was 3.30%, while its highest close was 4.98%.
The Federal Reserve (Fed) left the door so wide open after the end of the Federal Open Market Committee (FOMC) meeting in mid-December 2023, that markets have run ahead and have continued to push long-term rates lower since the decision was announced.
The long-awaited recession never materialized in 2023 as the sectors of the economy rotated from hot (i.e., travel and leisure) to cold (i.e., housing) over the last few years.
The S&P 500 reversed its 2022 losses, and then some, closing the year near a record high.
Welcome to 2024! As we wade into the new year, you will undoubtedly read and hear a wide range of forecasts predicting what financial markets are going to bring us over the next 12 months.
Here are our 10 themes for 2024. Count on more than a few surprise ingredients throughout the year to spice up the financial markets.
The year 2023 will be remembered by economists and investors as 365 days of resiliency and defied expectations. This week’s Weekly Economics will dive into the U.S. economic landscape and summarize the major factors that shaped the nation’s economic trajectory this year.
The year-end fiscal 2023 government funding bill contained legislation that makes the most significant changes to the U.S. retirement savings system in decades. The SECURE 2.0 Act builds on retirement savings changes passed in 2019 and contains new provisions that further raise the required minimum distribution (RMD) age, shift to automatic plan enrollment and provide for new matching/emergency withdrawal opportunities.
The market has been indecisive but with reason. 2023 has been filled with strong opinions however, many of the opinions are of contrasting beliefs. Reading the future is not easy.
Over the last few months, we have highlighted that the Fed should be done with its tightening cycle based on real-time, high-frequency data that suggested that economic growth and inflation were cooling.
November’s inflation numbers delivered good news for the Federal Reserve (Fed) even though the Consumer Price Index (CPI) was higher than what markets were expecting, with shelter costs surprising to the upside.
The last three years have seen extraordinary market turbulence and ever-changing market narratives – from COVID-19 to inflation, rising interest rates to geopolitical instability.
A tentative timeline toward rate cuts in 2024 was revealed in the updated Summary of Economic Projections.
Doug Drabik discusses fixed income market conditions and offers insight for bond investors.
To argue that the U.S. consumer has remained resilient has become a cliché and at the same time an understatement. After a very strong increase in real incomes during the pandemic, real income growth started to slow considerably.
Investors are beginning to price in a 'soft landing' as the base case over the next 12 months. This is evident across a number of indicators.
The financial markets, investor opinions, and world events have been all over the place – so bear with me this morning as I am going all over the place with a variety of year-to-date observations and comments.
Our forecast for the federal funds rate has the Federal Reserve (Fed) starting to cut rates in July 2024, with a second rate cut before the end of 2024.
For much of 2023, the market has tried to anticipate a Fed pivot – only to be wrongfooted several times. However, sharply higher interest rates, cooling inflation pressures and moderating wages have the market convinced that the Fed’s current tightening cycle is over.
Drew O'Neil discusses fixed income market conditions and offers insight for bond investors.
October news on CPI inflation was all the doctor recommended and has markets spinning and repricing the Federal Reserve’s (Fed) potential path forward.
Following the surge in inflation, the most aggressive Fed tightening cycle since the 1980s and multi-decade lows in business and consumer confidence, calls for a U.S. recession have been prevalent all year.
We understand that many economists/analysts/market participants are already discounting inflation as a serious problem for the U.S. economy. Even if this seems correct on the surface, the problem is very different for those who suffer the most from higher prices – middle- and lower-income individuals.
Good news – the earnings recession is over! After three consecutive quarters of negative earnings growth, 3Q S&P 500 earnings are on pace to climb 5% YoY. If sustained, this would be the best quarter of earnings growth since 2Q22.
The 2- through 30-year Treasuries rallied hard to drop yields from 12 to 18 basis points. By example, the 10-year Treasury price bottomed out at $91.86 (4.93%) and peaked at $95.25 (4.48%). This is a 3.4-point price swing or 45 basis point drop in yield.
After the October/November meeting, it seems that Fed officials have an added objective, as Fed Chair Jerome Powell said during the press conference that they needed to see interest rates “persistently high.”
The Federal Reserve (Fed) elected to not raise the federal funds rate at the October/November 2023 Federal Open Market Committee (FOMC) meeting.
While 3Q23 growth showed the economy expanded at a 4.9% annualized rate, it is important to remember that the GDP report is backward-looking.
Yields are at some of their highest levels in over a decade. This means that if you own fixed income in your portfolio, there is a good chance that you are seeing unrealized losses on your monthly statements (fixed income math = yields higher, prices lower).
Chief Economist Eugenio J. Alemán discusses current economic conditions.
Much like Halloween, it has been a scary time for investors.
Higher for longer. The Federal Reserve will likely maintain higher interest rates and remain open to another rate hike. Borrowing costs for households, businesses and governments have risen with soaring rates.
The strength in consumer demand has been one of the defining characteristics of a very resilient U.S. economy and September’s retail and food services sales report confirmed that the U.S. consumer is alive and well.
I was asked a pretty good question following an internal meeting late last week. The question started out by noting that we have been promoting going longer on the curve for a while now and then asking why we think longer-term rates will come down.
With next week’s 3Q GDP report shaping up to be a blockbuster number (the Atlanta Fed GDPNow is tracking a +5.4% growth rate), it is worthwhile to reiterate our thoughts on the economy and how we expect growth to unfold over the next year.
We hear and read daily analysis on how inflation is coming down and that the Federal Reserve (Fed) has beaten inflation. This is probably very close to the truth from an economics point of view.
As a strategist, I work with financial advisors every day creating custom fixed income portfolios based on client’s financial needs and goals – with a keen eye on the importance of a balanced portfolio.
The Federal Reserve (Fed) only controls one rate of interest, and it is a very short-term rate called the federal funds rate, the rate that banks charge each other for overnight, intra-bank loans.
The recent repricing in longer-maturity yields has pushed the 10-year Treasury yield to levels not seen in 16 years.
When the media speaks of the yield curve, they are likely referring to the Treasury yield curve. It is the point of reference for interest rate levels and investment comparison.
As heightened inflation has lingered, the Federal Reserve diminished hopes of 2024 interest rate cuts and economic data suggests a mild recession in the first half of 2024.
Investors had gotten used to smooth sailing with the economy remaining resilient, the equity market soaring double digits, and volatility remaining (mostly) subdued.
While government shutdowns impact the economy directly and indirectly, the magnitude of the impact is determined by the length and scope of the shutdown. Some operations can continue in a “partial shutdown” scenario, and thus impact the economy differently.
Inflation has declined considerably from last year’s peak of ~9.0% to ~3.7%. However, policymakers still think they have more work to do and have signaled that one additional rate hike is likely.
Downside equity market volatility can be unsettling, but it is important to put the pullback in perspective and identify the drivers of the negative market reaction. First and foremost, the equity market was due for a modest pullback.
Anyone who even casually pays attention to the financial media has likely become familiar with the current state of inflation as well as how high interest rates have risen over the past ~2 years.
Wednesday’s Federal Reserve (Fed) decision to keep the federal funds rate unchanged wasn’t a surprise at all. Markets, as we argued last week, had predicted that the Fed was going to stay put and that is what it did.
While our Washington Policy analyst believes there is a path to a resolution to avoid a government shutdown ahead of the looming September 30 deadline, the rhetoric out of Washington suggests otherwise.
For the second time in four months, the central bank decided to not increase interest rates but indicated another hike in 2023 is likely.
