Our latest views on data, trends and events influencing the markets.
Stay informed with the latest market news and analysis from Federated Hermes
VIEW INSIGHTS
Monthly
Weekly
Capital Markets
we're thinking
we're watching
The U.S. election drama is heating up with President Biden’s debate performance prompting a re-assessment. Core PCE came in as expected, at 2.6%. The University of Michigan’s sentiment survey indicates that consumers’ year-ahead inflation expectations fell to 3% from 3.3% the month before. The Fed is poised to cut next rather than hike, inflation is declining and recession is not in sight, all of which add up to a good outlook for risk assets. The U.K. holds parliamentary elections on Thursday.
For the holiday week we’ll have S&P Global Manufacturing and ISM Manufacturing PMI reports Monday, JOLTS and Fed Chair Powell speaking Tuesday, MBA mortgage data, balance of trade, exports/imports, jobless claims, S&P Global and ISM Services and FOMC minutes Wednesday and unemployment rate and payrolls Friday. U.S. markets are closed Thursday with an early close on Wednesday. Our strategists and portfolio managers cover the latest geopolitical, market and economic trends in our Insights section.
What
What
June 24, 2024
Weekly
October 2022
Additional resources
view dashboard
Inflation dashboard
VIEW PAGE
Election Watch 2024
Our fixed-income taxable multi-sector portfolios are underweight high yield, commercial mortgage-backed securities (CMBS), U.S. Treasuries and agencies, overweight MBS and emerging markets and neutral on investment-grade corporates. Tax exempt munis are attractive for investors in the top tax brackets in non-qualified accounts, despite currently rich ratios to Treasuries. We hold a neutral duration position and are positioned for a longer-term steepening of the yield curve.
Fixed income
Domestically, we continue to prefer defensive, dividend-paying stocks and are slightly underweight rate-sensitive large growth stocks. We’re overweight small-cap growth and large-cap value. Outside the U.S., we’re overweight and constructive on international large-cap and emerging markets.
International dynamics remain mixed, with divergence between economic improvements in Europe, contrasting with slow demand growth in Japan and the BOJ continuing its slow walk back from decades of dovish policy. As recently as April of this year, a rate cut by the BoE in June was practically a certainty, but the odds of a June easing have fallen to zero and ultimately pushed into August. This pattern first originated in the U.S. but has since expanded as monetary divergence among the world’s major central banks (X-Japan) was scaled back as economic data continued to improve in both Europe and the United Kingdom.
As expected, the ECB has made an initial 25 basis point rate cut, but the pace and extent of future cuts is uncertain. In emerging markets, various election results in Mexico, India and South America have prompted reactions in those home country markets without yet producing notable changes to the overall outlook.
In spite of a recent slowing in the pace of growth, labor market strength means the economy is not under stress and expectations of a soft landing remain the consensus. Recent JOLTS data suggests job openings may be less plentiful, but claims data suggests job loss is still very low. Market expectations for continued growth seem reasonable and supportive of our current 2024 GDP target of 2.0%.
Inflation remains too high, particularly in services, and markets have mostly come to terms with the likelihood of only one or two Federal reserve interest rate cuts by the end of the year. At present, recent inflation prints may have allayed fears of near-term reacceleration, but there are also pockets of continued resistance where belief in a near-term recession is extant.
Economies
Resources
.....
December
.....
Job Openings and Labor Turnover
.....
Emerging Markets
.....
Consumer Price Index
.....
Federal Open Market Committee
.....
Global Financial Crisis
.....
Eastern Daylight Time
.....
Mortgage-Backed Securities
.....
Standard and Poor's
.....
Institute of Supply Management
.....
United States
.....
Emerging Markets
.....
Personal Consumption Expenditures
.....
Automatic Data Processing
.....
Mortgage-backed Securities
.....
Bank of England
.....
European Central Bank
.....
Purchasing Managers Index
.....
Emerging Markets
U.S. economy
International economy
U.S. Equity
Positioning
London’s FTSE index rose in May, as did the EURO STOXX 50 and the MSCI All Country World ex USA, while the Nikkei was flat. Year-to-date, developed and emerging market returns lag those in the U.S. but appear to be on a firm footing.
After a pullback in April, the equity rally resumed in May, with the S&P 500, the Dow and, especially, the Nasdaq posting strong gains on the month of 5.16%, 1.51% and 7.24% respectively. On a sector basis, Information Technology, Utilities and Communication Services led outperformance verus the S&P 500, while Industrials, Consumer Discretionary and Energy fared worst. U.S. stocks continue to set record highs causing some well-known bears to reconsider their outlooks.
International Equity
U.S. 10-year Treasury yields fell from 4.6% and then retraced before falling again at month’s end to 4.5%. Over May, the yield curve shifted to more moderate ground but with yields that are still higher than the low water mark of the end of FY23. At the May 1st FOMC meeting, U.S. Federal Reserve Chair Jerome Powell dismissed market concerns that the U.S. Fed could potentially raise interest rates further. This helped expel growing concern that the U.S. rate hiking cycle had yet to peak. With inflation showing some limited signs of moderation, current market expectations are for a September Fed cut, but such action is by no means certain.
Positioning
Liquidity
iquidity
Fixed Income
Equities
Equities
Economies
Economies
Liquidity
Fixed Income
Equities
Economies
June 2024
Monthly
While money market yields are compelling, maintain a bias to lengthen duration.
Take a balanced approach to credit due to tight valuations but a stable economic environment in the near term.
Take a more balanced view on fixed vs. floating rate securities given current valuations.
Use mortgage-backed securities where possible to capitalize on available carry and prepare for potential benefit of future spread compression.
Relative to longer-term fixed income, the 0-3-year part of the yield curve is attractive. These themes are guiding our investment views in the space:
Positioning
Following the May Federal Open Market Committee meeting, Federal Reserve (the Fed) Chair Jerome Powell reiterated his belief that policy is currently restrictive and will, over time, be sufficiently restrictive in the battle with inflation. Fed futures contracts are currently showing expectations that the first cut in the target range of the federal funds rate won’t come until November. This bodes well for liquidity portfolios which continue to take advantage of elevated yields. However, investors interested in total return opportunities may be looking to extend durations prior to the first cut. As expected, the Fed announced it would taper the amount of Treasurys rolling off its balance sheet by lowering the monthly cap from $60 billion to $25 billion starting in June. It kept the monthly cap for maturing mortgage-backed securities at $35 billion.
Equities
Fixed Income
Liquidity
Economies
.....
Chief Information Officer
Economies
Liquidity
Fixed Income
Equities
Economies
Liquidity
.....
United States
.....
Mortgage-Backed Securities
.....
Commercial mortgage-backed securities
.....
United Kingdom
.....
Gross Domestic Product
.....
Emerging Markets
.....
Emerging Markets
.....
Year to Date
Fixed Income
.....
Gross Domestic Product
.....
Emerging Markets
.....
Silicon Valley Bank
.....
Emerging Markets
.....
United States
.....
Emerging Markets
.....
United States
.....
United States
.....
Year-to-Date
.....
Standard & Poors
.....
Standard & Poor's
.....
Price-to-Earnings
.....
Earnings Per Share
.....
Price-to-Earnings
.....
United States
Equities
.....
United States
.....
United Kingdom
.....
Personal Consumption Expenditures
.....
United Auto Workers
.....
Gross Domestic Product
.....
United States
.....
United States
.....
Federal Open Market Committee
.....
United States
.....
Producer Price Index
.....
European Central Bank
.....
third quarter
U.S. fixed income
International
May was a fairly subdued period for global fixed income markets in both volatility and total return measures. The notion that the Fed was not eager to hike interest rates further removed a focal concern for global investors who had begun to imbed this uncertainty in a host of risk premiums. Emerging markets bonds remained resilient to recent higher yields and interest rate volatility globally.
.....
Organization of the Petroleum Exporting Countries
.....
Federal Open Market Committee
.....
Federal Open Market Committee
.....
European Central Bank
.....
International Monetary Fund
.....
European Central Bank
.....
Mortgage-Backed Securities
Positioning
Fixed income
.....
Union Bank of Switzerland
.....
Investment Grade
.....
Capital Expenditures
.....
Emerging Markets
.....
Morgan Stanley Capital International
.....
Personal Consumption Expenditures
.....
High Yield
.....
Commercial Mortgage-Backed Securities
.....
United States
.....
Artificial Intelligence
Read our Fixed Income committees’ current views and positioning >
Euro and U.K. rates markets are off slightly year-to-date as markets remain stuck between growth fundamentals still not looking enough like a recession is imminent and inflation continuing back to target. PMIs in services and manufacturing have come in stronger in the U.K. and in Europe manufacturing PMIs recovered while services were very marginally lower than December, but both sub-fifty. Weak China growth continues to point to a difficult growth outlook, for Germany in particular, with both reduced demand for industrial imports and competition in the autos space weighing on future growth prospects.
.....
December
.....
United Auto Workers
.....
Overweight
.....
Probability Risk and Impact System
.....
Johnson & Johnson
.....
National Association of Home Builders
.....
National Federation of Independent Business
.....
Organization for Economic Cooperation
and Development
.....
Earnings Per Share
.....
Bank of England
.....
United States
.....
Gross Domestic Product
.....
Bank of Japan
.....
Standard & Poor's
.....
Standard & Poor's
.....
United States
.....
Morgan Stanley Capital International
.....
Europe, Australasia, and the Far East
.....
Gross Domestic Product
.....
Purchasing Managers Index
.....
Federal Reserve
.....
fourth quarter
.....
Bank of Japan
.....
Purchasing Managers Index
.....
Quarter on Quarter
.....
Producer Price Index
.....
Consumer Price Index
.....
Kansas City
Inflation calming after winter storm
.....
Institute of Supply Management
.....
Job Openings and Labor Turnover Survey
.....
Year over year
.....
United Kingdom
.....
United States
.....
Consumer Price Index
.....
Artificial Intelligence
.....
Consumer Price Index
.....
Environmental Impact Assessment
.....
Bank of England
.....
Bank of Japan
.....
Personal Consumption Expenditures
.....
Federal Reserve
.....
Year over Year
.....
Mortgage Bankers Association
.....
Financial Times Stock Exchange
.....
United States
.....
United States
.....
United States
.....
Gross Domestic Product
.....
Consumer Price Index
.....
Fear of missing out
.....
Institute of Supply Management
.....
United States
.....
Federal Open Market Committee
.....
United States
.....
United States
.....
Job Openings and Labor Turnover Survey
.....
United States
.....
Standard and Poor's