Global Fixed Income Strategy - February 2024
US macro update
Overview
Our focus this month is on the strength of the US economy, receding recession risks and the start of the US Federal Reserve (Fed) rate cutting cycle. All of these factors could lead to easier financial conditions and potentially lift animal spirits. This backdrop would be stimulative for the US economy, which is already growing near its potential. If financial conditions ease too rapidly, the Fed may lean against them by cutting rates more slowly than expected. Earlier this year, the bond market was pricing in around five rate cuts for 2024, though that looked like too many. Currently, the market is pricing in between three and four cuts. Recent higher than expected inflation data suggest that disinflation can be bumpy. However, we believe it is too early to predict changes in Fed policy since price adjustments tend to be volatile early in the year.
