Financial markets rebounded strongly last week after recent communication from Federal Reserve (Fed) officials indicated that larger rate hikes this summer could provide the Fed with more flexibility to pause its tightening this fall. Release of the Fed meeting minutes for May also signaled a less “hawkish” stance than investors feared. The Fed minutes suggested that with survey-based measures projecting a “significant deceleration in inflation in the coming years,” the Fed would have the ability to reassess the effects of policy firming later this year.
This week, Friday’s employment report takes center stage among economic releases. Fed officials will be looking for some signs of cooling in the labor markets as an indication that rate hikes are beginning to impact what Chair Jerome Powell has labeled an “overheated” job market. Another notable event starting this week is the runoff of the Fed’s $9 trillion bond portfolio. The Fed will be watching closely for any signs of vulnerability in the liquidity of markets for Treasury securities and its impact on financial stability as quantitative tightening begins.
< Go to Monday Morning Perspectives
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.