The Fed’s inflation focus implies a high bar for rate hikes in 2020. Further cuts this year cannot be ruled out if inflation continues to undershoot the Fed’s target.
Q2 Market Commentary
We remain cautiously optimistic that the Fed will see the light, that Brexit will move in a benign fashion, and that tariff disputes will subside. Spread sectors and duration remain our focus.
The bond market has already priced in cuts later this year. Though possibly ahead of itself in terms of timing, the market’s call on the direction of rates looks right, notes Western Asset’s John Bellows.
June Meeting Analysis
Wednesday's Fed statement makes a rate cut in July the base case for investors, with a 25-basis-point move most likely.
Chart of the Week
Chart courtesy of ClearBridge Investments. Source: FactSet, as of 9/30/2019. U.S. stocks are represented by the MSCI USA Stock Index. European stocks are represented by the MSCI Europe Stock Index. Index values re-indexed to 100 on 12/31/1969. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.
Chart of the Week
The idiosyncrasies of niche markets can provide opportunities but require professional expertise.
Fair value for currency volatility reflects current market conditions.
The European Commission's plan to increase adoption of ESG principles throughout the region is a positive for bond investors.
Policy continuity is the name of the game for now -- with the hurdle to cut rates much lower than the hurdle to raise them.
The Fed's focus on below-target inflation leaves the door open to future rate cuts.
Fourth Quarter Outlook
Looking ahead, we think global growth will slowly improve with inflation remaining modest – continuing to favor spread sectors.
Global fixed income
With Emerging Markets growth projected to accelerate and valuations compelling, debt markets in select EM countries merit careful consideration.
Western Asset examines recent trends in the muni bond market and provides its outlook about conditions ahead.
Q4 Market and Strategy Update
With core inflation below even our more dovish estimates, we expect global growth to remain low by historical standards -- but also resilient.
LIBOR, one of world's most widely used financial benchmarks, is being phased out -- but what will replace it? Western Asset examines the consequences and impact for investors.
How U.S. and overseas investment-grade corporate bonds benefit from increasingly negative government bond yields.
Current market conditions make the shorter end of the maturity curve potentially attractive from a risk/reward point of view.
Q3 2019 Market Commentary
Despite drastic changes in the investment backdrop, short-term pessimism about growth is overdone and higher rates are likely only in the distant future.
Why Western Asset believes the current positive phase of the credit cycle will likely continue.
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