SLQD - What The Bond Market Knows For Certain... That Just Ain't So
2024-04-08 15:00:00 ET
Summary
- The bond market outlook has improved as expected rate cuts align more closely with the Fed.
- Easing financial conditions from asset price changes may lead to continued uncertainty around policy restrictiveness, undermining the urgency and need for policy normalization.
- Given the benign economic backdrop, the desirability of quality stocks may have more to do with balancing the risks of secular growth exposures in portfolios than the expectation for credit deterioration.
A favorite Mark Twain aphorism states, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Bond markets began 2024 with certainty that a return to 2% inflation would allow the US Federal Reserve (“Fed”) to cut interest rates in March and at every Federal Open Market Committee (“FOMC”) meeting that followed. But what bond markets knew for sure turned out to not be so - leading to “trouble” (or disappointment) in the form of negative 1.50% returns to start the year....
What The Bond Market Knows For Certain... That Just Ain't So