BSJT - Fixed Income Investment Outlook Q2 2024: A Winding Downward Path

2024-04-15 08:20:00 ET

Summary

• Investors continue to wait for clear signals as to the timing and extent of interest rate cuts.
• After last year’s significant progress on prices, inflation remains elevated and slow in its path toward target levels.
• Although the timing remains uncertain, we believe that the Federal Reserve and European Central Bank will likely begin their downward journey sometime this year.
• Rather than focus on the “when,” we believe investors should position themselves for this gradual transition, putting cash to work in short to intermediate maturities and capitalizing on price opportunities existing in loans, securitized products and emerging markets debt, among other areas.

While inflation remains a stubborn issue, the softening economy suggests that developed-market monetary easing could start sometime this year.

If you like ambiguity and mixed signals, the current economic and market climate has something for you. Following 2023’s solid progress on inflation, markets became convinced by the start of 2024 that the Federal Reserve was on track to cut rates in short order. However, so far this year, the U.S. economy has remained surprisingly resilient, inflation has largely stabilized at above-target levels and bond yields have generally inched upward, with the 10-year U.S. Treasury at 4.2% as of March 31, and year-to-date fixed income returns in modestly negative range....

For further details see: