![]() Aging populations around the globe are driving up savings and the demand for safe yields. While there may be periods when the yield curve steepens, long-term demand for low-risk bonds remains strong. We will be looking for opportunities to add to intermediate- and long-term bond holdings as yields move higher. With short-term breakeven rates higher than long-term breakeven rates, the market is pricing in declining inflation rates over the long run compared to today's elevated readings. Breakeven inflation rates are the difference between the yield of a TIPS and the yield of nominal Treasury of similar maturities. Since the September FOMC meeting, breakeven rates in the Treasury Inflation-Protected Securities (TIPS) market have spiked up for one- and two-year maturities relative to long-term maturities. Currently, inflation expectations have risen, but mostly for shorter time horizons. Even Fed Chair Jerome Powell indicated that inflation has lasted "longer than expected" and that the Fed would favor raising rates if there are "serious risks of higher inflation expectations."Ĭonsequently, we are watching two key indicators-inflation expectations and the employment-to-population ratio. Nonetheless, several Fed officials have indicated concerns about inflation recently. Since it adopted its "flexible average inflation targeting" policy in the summer of 2020, the Fed has emphasized its willingness to let inflation overshoot 2% for a period of time in order to allow more time for the unemployment rate to fall. Our expectation is that the Fed will take a gradual approach to tightening monetary policy as long as inflation expectations do not remain significantly above the 2.5% to 3.0% level. A low estimate of this "terminal rate" suggests investors don't believe economic growth will be strong enough on a sustained basis to warrant a policy rate much above 2% in this cycle, which is slightly lower than the previous cyclical peak in 2019 and far below the 5.25% levels seen in 2006. #WORLDSHIFT CD KEY SERIES#Environmental, Social and Governance (ESG) Investingĭespite market expectations for a series of rapid increases in rates over the next two years, it's notable that it is pricing in a lower longer-run rate for federal funds than the Fed.Bond Funds, Bond ETFs, and Preferred Securities.ADRs, Foreign Ordinaries & Canadian Stocks.Environmental, Social and Governance (ESG) ETFs. ![]() ![]() Environmental, Social and Governance (ESG) Mutual Funds.Benefits and Considerations of Mutual Funds. ![]()
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