Data Dependence Persists
- Overall, markets appear resilient in the face of the highly uncertain economic backdrop, given the inflation data seen for the first quarter.
- While a fair distance remains between current market rates and the cycle highs seen last fall, “higher for longer” continues to influence trading in Treasuries, even with a central bank that consistently leans into the market’s desire for an easier stance on monetary policy.
- The May 1st Fed press conference made clear that additional hikes were not on the table, and the stock market spent the balance of the quarter establishing record highs. Spread markets exhibited a similar resilience.
- Markets remain hypersensitive to inflation and labor market updates, but as the Fed repeatedly reminds us, the totality of the data will dictate monetary policy.
- Valuations across the investment-grade credit spread sectors continue to lean rich across varying historical time periods. The macro backdrop of higher leverage, higher refinancing costs, and a still uncertain inflation backdrop amidst an exceptionally volatile election cycle is a flashing yellow light for taking risk.
Investment Partner
The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.
Bonds: Bonds may offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. Generally, a portfolio's fixed income securities will decrease in value if interest rates rise and vice versa.
All investments carry a certain degree of risk, including possible loss of principal.
Past performance is not indicative of future results.
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