It’s Finally Happening
We've been saying for some time we believed that the Federal Reserve interest rate increases would significantly impact the US economy. That's happening right now.
Here's the question we have to ask: are we in for a hard or soft landing? Economists are mixed in their opinions. Our view is that a shallow recession is the most likely outcome, and we are investing based on this assumption.
Just in case our projections are incorrect, and rates spike higher, we continue to underweight durations of fixed income. But looking at Treasury yields, the bond market is pricing in a slower growing economy.
A CNBC article highlighted the recent data. An excerpt is provided below.
"Growth in the U.S. slowed considerably during the first three months of the year as interest rate increases and inflation took hold of an economy largely expected to decelerate even further ahead.
Gross domestic product, a measure of all goods and services produced for the period, rose at a 1.1% annualized pace in the first quarter, the Commerce Department reported Thursday. Economists surveyed by Dow Jones had been expecting growth of 2%."