Yield Curve
We remain constructive on US equities, but higher yields, slower EPS growth and heavy IPO issuance remain significant risks to valuations, leaving the path to our year-end target increasingly dependent on earnings. Tactically, there has already been a significant, but benign, compression in multiples, as earnings have outpaced prices. A well-communicated Fed hike could ease rather than intensify bond-market uncertainty.
Our US Equity strategists remain constructive on the S&P 500. They identify the bond market as the principal risk to valuations in today's positive stock/bond correlation regime. Equities can tolerate higher yields when these reflect stronger growth, but…
Kevin Warsh announced an ambitious reform agenda for the Federal Reserve. We discuss the potential impact and the current outlook for interest rates.
The April FOMC minutes clarified the hawkish shift that marked the meeting. The Fed held at its last meeting, but there were four dissents. While Governor Miran favored a 25 bps cut, regional presidents Hammack, Kashkari, and Logan supported a hold but voted…
The rates market is moving back into a low vol regime, but with yields at a higher level. This argues for maximizing carry across the Treasury curve.