- Fixed Income Portfolio Manager
United States, Institutional
ChangeThe views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
The May Federal Open Market Committee (FOMC) statement noted that in recent months inflation has failed to show further progress toward the Fed’s 2% objective. As a result, the clear bias to ease rates has disappeared. Chair Powell was quick to note that he thought it was unlikely that the next policy move would be a hike, but the market could be waiting for much longer than previously expected for the FOMC to begin cutting rates. Powell did highlight that the Fed is particularly attuned to the state of the labor market and would react if it saw any outsized weakness. From my perspective, this puts more asymmetry into prospective price action if the April labor report is meaningfully misaligned with expectations.
Inflation has not cooperated
Inflation data, which had precipitously declined over the second half of 2023, has since proven much stickier, with the Fed’s preferred core personal consumption expenditure leveling at 2.8% year over year as of the March reading. The labor market has also demonstrated resilience, though some of the leading indicators I monitor suggest a turn may be imminent. In addition, the quits rate — an important leading indicator for wage growth — has declined to its lowest level this economic cycle, which suggests workers have less confidence in finding new jobs. This typically leads wages and service price inflation lower. Still, broader economic data have proved stronger than forecasted; investors will need patience in awaiting the next easing cycle.
Clarity on quantitative tightening (QT) tapering
The Fed also announced it would slow the pace of its balance sheet reduction by redeeming no more than US$25 billion in Treasury securities per month, down from up to US$60 billion per month. This Fed statement coincided with the latest quarterly refunding announcement from the US Department of the Treasury, released earlier in the same day, which announced that it would begin buying back up to US$30 billion in Treasury securities in the secondary market. While both events were scheduled months in advance and policies are conducted independently, I do find it interesting the Treasury market’s two biggest players announced significant policy changes on the same day that should both benefit the Treasury market in the near term.
Final thoughts for Fed watchers
Although the Fed will not update its summary of economic projections again until the June FOMC meeting, it seems clear that its bias for easing policy rates has moderated. I still think there is a good chance the Fed will be able to deliver rate cuts this year. Policy rates have been restrictive for quite some time and the lagged impacts are likely still working their way through the economy. Of course a potential “Trump card” played in November, with the accompanying inflationary impacts of expected more restrictive trade and immigration policies, could challenge that view.
Expert
Related insights
Showing
of
Insights Posts
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
The Fed’s lessons learned from its COVID response
Continue readingBy
event
6
min
Article
2025-04-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
FOMC: Stable policy amid market volatility
Continue reading
event
Quick Take
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Is the US economy really that different since COVID?
Continue readingBy
event
Article
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Income: the hard worker in your portfolio deserves more credit
Continue readingMultiple authors
event
5
min
Article
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
The shifting liquidity landscape: What’s at stake?
Continue reading
event
Quick Take
2025-01-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Bizarro World: Could 2024 be the opposite of 2023?
Continue readingBy
event
Quick Take
2025-01-17
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
URL References
Related Insights
Stay up to date with the latest market insights and our point of view.
highlight_off
You've been subscribed
Thank you for subscribing. You can manage your subscription using the links provided in any of our subscription emails.
Read next
Showing
of
Insights Posts
Economic cycle
Interest rates
Monetary policy
Fixed income program
Inflation
Fiscal policy
USA
Credit
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
The Fed’s lessons learned from its COVID response
Fixed Income Portfolio Manager Brij Khurana breaks down the central bank's policy decisions during the pandemic and explains how they continue to affect financial markets.
By
event
6
min
Article
2025-04-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Japan equity: Reason to believe
Our expert argues that corporate governance reform and the Japanese economy's escape from persistent deflation have laid the groundwork for a sustainable equity rally.
event
4
min
Article
2025-04-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Fiscal policy
Volatility
Monetary policy
Fixed income program
Inflation
Interest rates
Americas
Fixed income
Credit
Government bonds
High yield
Investment grade
Quick Take
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
FOMC: Stable policy amid market volatility
The Fed is holding steady amid market turmoil. See our quick notes on the FOMC's March policy statement, forecasts, and the Fed chair's press conference.
event
Quick Take
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Economic cycle
Interest rates
Monetary policy
Fixed income program
Inflation
Fiscal policy
USA
Credit
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Is the US economy really that different since COVID?
US economists have been touting the resilience of the post-COVID economic rebound. Brij Khurana dissects several key economic indicators to see what's really changed since 2019.
By
event
Article
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Income
Fixed income
Asset allocation
iStrat program
Inflation
Value vs growth
Economic cycle
Monetary policy
Tactical allocation
Equity
Multi-asset
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Income: the hard worker in your portfolio deserves more credit
Income from cash is good but income from bonds is better. In a less certain macro environment, Alex King, Supriya Menon and John Mullins think the case for income only gets stronger. How can investors make the most of opportunities?
Multiple authors
event
5
min
Article
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
The shifting liquidity landscape: What’s at stake?
The beginning of the end could be in sight for the Federal Reserve’s quantitative tightening (QT) program. US Macro Strategist Juhi Dhawan considers the Fed's next steps and what they could mean for banks, liquidity, and markets broadly.
event
Quick Take
2025-01-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Economic cycle
Interest rates
Monetary policy
Credit
Americas
China
Europe
Fixed income program
Quick Take
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Bizarro World: Could 2024 be the opposite of 2023?
Fixed Income Portfolio Manager Brij Khurana details the dynamics that may upend investor expectations of a repeat of 2023 this year.
By
event
Quick Take
2025-01-17
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Asset allocation
Monetary policy
Economic cycle
iStrat program
Tactical allocation
Inflation
Multi-asset
Equity
Fixed income
Commodities
Multi-Asset qualifier
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Fork in the road: Slowdown or reacceleration ahead?
Markets seem to expect a much smoother ride in 2024, but are they too optimistic? Members of our Investment Strategy & Solutions Group offer their macro and market outlook, including their latest views on equities, bonds, and commodities.
Multiple authors
event
Article
2026-01-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Interest rates
Economic cycle
Monetary policy
Fixed income program
Americas
Fixed income
Government bonds
Investment grade
Multi-Sector Credit
Global Credit Plus
Quick Take
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Fed’s projections yielded mixed results this year — what’s in store for 2024?
Our Fed watcher opines on 2023 policy and looks ahead to 2024.
event
Quick Take
2024-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Should investors prepare for a rate hike in Japan?
Investment Directors Marco Giordano and Masahiko Loo discuss why a rate rise in Japan may occur sooner than markets expect.
event
Quick Take
2024-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
The US economy in 2024: A tale of transition
Our US macro expert sees changes in consumer and investment spending in the coming year, and highlights what she'll be watching for in terms of policy, politics, and profit margins.
event
Article
2024-06-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
URL References
Related Insights
contact us
legal Information
© Copyright 2024 Wellington Management Company LLP. All rights reserved. WELLINGTON MANAGEMENT ® is a registered service mark of Wellington Group Holdings LLP. For institutional or professional investors only.
Japan equity: Reason to believe
Continue readingBy
Toshiki Izumi, CFA, CMA