ultimatexvideopoker| Reshaping the global investment landscape! Is the "era of low interest rates" gone forever?

Source: Jinshi data

According to the latest estimates from the mediaUltimatexvideopokerAfter the Federal Reserve, the European Central Bank and the Bank of England jointly raised interest rates by 1475 basis pointsUltimatexvideopokerIt may only be reduced by 575 basis points by the end of 2025.

The latest economic outlook is changing the investment landscape after a series of disappointingly high inflation data and better-than-expected economic activity in the US. It provides more time to lock in current relatively high yields, and because some central banks will ease monetary policy before the Fed, it also provides an opportunity for relative value bets.

The media's macro-yield model last November showed that the 10-year Treasury yield would close at 4% by the end of the year.Ultimatexvideopoker.1%. As of Thursday, the model showed that the yield on 10-year Treasuries should be 4.Ultimatexvideopoker.4%, down slightly from the current 4.65%.

According to Ana Galvao, the economist who built the model, "the downward surprise in the inflation data at the end of 2023 and the subsequent upward surprise in February" are the main reasons for the difference.

Anne Walsh, chief investment officer of Guggenheim Investment Management, said the shift in monetary policy was always difficult to grasp, but the severe damage caused by the epidemic and the unprecedented fiscal stimulus since the spring of 2020 made it more difficult to seize the opportunity.

"all the historical laws that existed in the past have been extended, for example, from the start of the Fed's rate hike to the start of the recession, which is usually 18 to 24 months," she said. "

Walsh, who manages more than $300 billion in assets, says federal reserve chairman Colin Powell and his colleagues are complicating the task of bringing inflation back to 2% as the fiscal deficit continues to be historically high. She points out that it is not normal to have a large deficit when the unemployment rate is below 4%.

Walsh says she is very bullish on investment-grade bonds and believes that potential credit fundamentals are good and yields of around 5.5% to 6.5% are attractive. As of Thursday, the yield on the Bloomberg u.s. composite index was 5.75%.

The outlook for the Fed's interest rate cut has also changed in the derivatives market, which expects the Fed to cut interest rates by only 25 basis points this year, with some options for traders even guarding against the possibility of the Fed raising interest rates again.

Interest rate spreads between major central banks are also widening. On February 1st the market hinted that interest rates for the fed and the ECB would be 3.97% and 2.52% respectively at the end of the year. As of Friday, the market also thought interest rates were 4.96% and 3.20%, respectively.

European money markets have shown greater confidence in this year's easing, with the ECB and the Bank of England expected to ease by 69 basis points and 43 basis points respectively as of Friday.

"the downside risk to US interest rates is smaller than in Europe," said Steven Barrow, head of G10 strategy at Standard Bank in London. He told clients to be bullish on German bunds, not US Treasuries.

Continued economic resilience has led the IMF to believe that advanced economies will accelerate rather than slow this year, which should allow major central banks to continue to shrink their balance sheets, which ballooned during the COVID-19 crisis.

The Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan together expanded their balance sheets by $9 trillion in 2020 and 2021. Foreign media now expect these central banks to implement cumulative quantitative tightening of about $3tn between 2024 and 2025 by the end of next year, even after the Fed said it was inclined to slow the pace of quantitative tightening by about half.

That means private sector investors will need to step up the supply of government debt, a process that could be made easier by higher long-term bond yields.

According to Anwiti Bahuguna, chief investment officer for global asset allocation at Northern Trust Asset Management (Northern Trust asset Management), it is worthwhile to invest in the credit sector in the current environment.

Northern Trust, which manages about $1.2 trillion in assets, expects the Fed to cut interest rates up to twice in the second half of the year, is investing heavily in US high-yield bonds and expects the Fed to succeed in reducing inflation without damaging the economy. Bahuguna said in an interview:

"We are very neutral to all asset classes except high-yield assets, and high-yield bonds should perform well and, although economic growth is slowing, it is still strong, so the risk of default is low."