Fixed-income markets have fully priced in a fourth consecutive 75-basis-point rate hike at next week’s Federal Reserve (Fed) meeting. 1 However, during a talk on Friday at the University of California, San Francisco Fed President Mary Daly started to prepare investors by commenting that it was time to “start planning for stepping down” the size of rate hikes.2
Following months of Fed officials aggressively hammering home their inflation-fighting resolve, President Daly’s message was the first dovish-leaning communication in months. Daly also suggested that 4.5% to 5% was still the likely landing spot for the federal funds rate before any talk of a pause would be considered. 3
This week’s economic calendar is a busy one, highlighted by our first look at third-quarter U.S. gross domestic product data out Thursday and new readings on the Fed’s favorite inflation gauge — personal consumption expenditures — on Thursday and Friday. This week will also be busy on the earnings front with nearly one-third of all S&P 500 Index companies reporting, including most of the large-cap tech names such as Alphabet, Apple, Amazon and Microsoft. 4
Sources:
1 Source: Reuters- U.S. yields slide from multi-year highs on hopes of Fed pivot; 10/21/22
2 Source: MarketWatch- Fed’s Daly: Time to start talking about slowing interest-rate hikes; 10/23/22
3 Source: Bloomberg- Daly Says Fed Should Start Planning for Smaller Rate Hikes; 10/21/22
4 Source: MarketWatch- This Week's Major U.S. Economic Reports & Fed Speakers; as of 10/24/22
< 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.
