FTSD News and Press, Franklin Liberty Short Duration U.S. Government From 03/02/23

Summary The seasonally adjusted money supply in January increased by $31 billion. This was the first increase in the money supply in five months. Looking at the seasonally adjusted numbers shows that this month increased the money supply by 1.8% which was above the -1.7% 12-month trend ...

Summary The US Money Supply has contracted 1.7% over the last 12 months – the largest year-over-year decline on record. This massive liquidity reversal is a formidable headwind for asset markets globally over the next few quarters. At the same time, interest rates have explod...

Summary After reaching a peak reading of 9.1% in June, the year-over-year increase for overall CPI had fallen to 6.5% to end 2022. While progress was being made on the core inflation front, it appeared to have a more ‘sticky’ component to it. A continued broader coolin...

Summary Over the past few decades, investors have become conditioned to expect that rising interest rates will trigger broader US financial market crises. While it’s true that rate hikes have preceded past financial crises, the underlying causes have actually been broader. Pa...

Summary After eight rate hikes from the Federal Reserve in the last year and declining inflation during the back half of 2022, many had hoped the worst of the price increases were behind us. The personal consumption expenditures price index (PCEPI) grew at an annualized rate of 7.4 perc...

Summary Over the past year, the Federal Reserve has raised rates by 450bps, and yet, economic data so far in 2023 shows a booming labor market, strong consumer spending growth and somewhat higher-than-expected inflation. But investors, economists and policymakers be warned: there are lo...

Summary The consequences of decades of unsound money are coming home to roost. Investment-grade bond funds posted inflows of $184 million, while junk bond funds reported outflows of $6.125 billion (from Lipper). The Federal Reserve’s preferred inflation gauge rose last month ...

Summary Inflation is on a downward trajectory but will take time to return to target. Last week’s U.S. Consumer Price Index reading was in line with consensus expectations for January, with headline CPI increasing 0.5% month-over-month and 6.4% year-over-year. With the Januar...

Summary 7-10-year US Treasury yields have fallen faster than 1-3-year yields, which have remained anchored by a further 75bp of Fed tightening at the December and February FOMC meetings. The Fed could find itself forced to tighten more aggressively than predicted, should wage inflation ...

Summary Market sentiment regarding inflation has turned from one of excessive optimism about a decline in inflation to one of excessive pessimism about an increase. Inflation will decline in 2023, I think, but the decline will be gradual and volatile. Expectations of softening infla...