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
Stock and bond markets retreated in lock-step with the unexpected drop in GDP, but the Federal Reserve’s favorite inflation indicator, PCE, rose in March as did personal spending. Overheating is the main Fed concern, but investors may be worried that the slowing seen in other developed markets could be spreading to the U.S. Multiple potential economic scenarios exist, and quick market reaction to surprises can be common when expectations shift.
With the FOMC meeting this week we should be hearing what the Fed thinks about the latest GDP print. This week’s plentiful data includes Dallas Fed Manufacturing on Monday, Redbook and housing data Tuesday, mortgages, manufacturing PMI and Fed interest rate decision and press conference Wednesday, trade data and jobless claims Thursday, non-farm payrolls, and services PMI Friday. Our strategists and portfolio managers opine on a range of current topics in our Insights section.
What
What
April 29, 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, investment-grade corporates and commercial mortgage-backed securities (CMBS) largely on valuation concerns. We are overweight on U.S. Treasuries, agencies, MBS, and emerging markets (EM). Tax exempt munis remain attractive for investors in the top tax brackets in non-qualified accounts, despite currently rich ratios to US Treasuries. We are currently neutral duration 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.
As the case for interest rate cuts in the U.S. grew weaker in March, the prospect for easing from other central banks grew stronger. The latest U.K. inflation data showed prices falling more than forecast, adding to expectations that the Bank of England (BoE) will likely begin cutting rates over the summer. GDP growth has remained anemic at best across a number of developed markets, including Japan, the U.K. and Germany. General expectations are that the European Central Bank (ECB) may start to ease policy in June. Recent economic data in China is slightly more positive, with monetary and fiscal policies increasingly accommodative. Inflation is mostly under control across emerging markets as evidenced by declining local interest rates.
The U.S. Federal Reserve (Fed) left key rates unchanged In March but also continued to sound amenable to easing expectations despite a string of U.S. economic data appearing unsupportive of cuts. This messaging was celebrated by equity markets; however, bond markets and the U.S. dollar told a different tale as March played out. Both U.S. yields and the USD focused more on “risk-off” and the robust economic data than the easing bias that Chair Jerome Powell seemingly projected.
Indicators of growth have mostly surprised to the upside, motivating upward revisions in current and upcoming quarterly GDP forecasts. Labor market data continued to look strong, with initial claims consistently in the low 200,000 area and recent payrolls data surprising to the upside. The unemployment rate is off its lows but remains at levels consistent with a healthy labor market sufficient to produce real wage growth for consumers. Inflation data remains above the 2% Fed target and has not yet provided sufficient confidence for the Fed to begin easing gradually in its attempt to secure a soft landing. As of early April, markets priced in a 71% chance of a cut by at least the June meeting, with three 25 basis-points cuts before the end of the year.
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
Developed markets (DM) stocks were positive overall during March. U.K. and major European stocks rose, while the Nikkei ended flat for the month after hitting record highs. In general, DM economies are experiencing slower growth than the U.S., but also to varying extent, await weaker inflation and rate cuts, and their less buoyant equity returns reflect this. Emerging markets stocks moved into the black after a slow start for the year.
U.S. equities continued to rally in March, with investors seeing strength in the economy and earnings and showing little concern about higher for longer and diminishing expectations of any aggressive rate cuts by the Fed. The S&P 500, the Dow and the Nasdaq all notched their fifth consecutive month of gains. First quarter outperformance is causing shifts in consensus views for 2024 and debate as to whether stock returns are experiencing a typical extension of 2023 momentum or entering a potentially volatile phase.
International Equity
Bond total returns improved during March, however high yield remained the main positive performer year-to-date. The Treasury market has spent the last three months reacting to buoyant growth and inflation data by unwinding the excessive easing expectations that prevailed in December of 2023. Treasury volatility is well below the 2023 peaks and the market now appears to be priced reasonably for the median Fed dots trajectory of three eases in 2024. The Fed and market yield levels remain data dependent, with a heavy focus on the inflation data as evidenced by recent moves in the 10-year Treasury yield. Should inflation remain sticky, the Fed may hold at current restrictive rates for longer than anticipated and Treasury yields could reprice higher. If inflation ebbs, Chair Powell will likely push for the somewhat divided Federal Open Market Committee to layer in gradual easing, likely unleashing some downward pressure on market yields. A more rapid decline in yields would require a sudden drop in inflation, sudden weakness in labor markets or a financial shock.
Positioning
Source: FRED®, U.S. Treasury, Bloomberg
As of 3/29/2024
5.31%
5.49%
5.46%
5.38%
5.03%
1.28%
5.22%
Short-term yields
SOFR 30-Day Avg
1-month T-Bill
3-Month T-Bill
6-Month T-Bill
1-year T-bill
MMDA Avg
First Tier IS Avg
Liquidity
iquidity
Source: Bloomberg
As of 3/28/2024
-0.78%
-2.08%
1.47%
-0.09%
Total YTD Returns
U.S. Aggregate
Global Aggregate
U.S. Corporate High Yield
S&P Municipal Bond
Fixed Income
As of 3/28/2024 10.56%
5.18%
9.11%
5.78%
2.37%
Total YTD Returns
S&P 500
Russell 2000
NASDAQ COMP
MSCI EAFE
MSCI EM
Equities
Equities
Percentages as of 3/31/2024
Source: Trading Economics.
Jobless Rate
3.90
6.40
5.30
2.60
3.90
Inflation
3.20
2.60
0.70
2.80
3.40
Interest Rate
5.50
4.50
3.45
0.00
5.25
GDP QoQ
2.10
0.30
0.80
1.50
0.20
GDP Growth
3.40
0.00
1.00
0.10
-0.30
Country
United States
Euro Area
China
Japan
United Kingdom
Macro Dashboard
.....
Gross Domestic Product
.....
Gross Domestic Product
Economies
Economies
Liquidity
Fixed Income
Equities
Economies
April 2024
Monthly
While money market yields are compelling, maintain a bias to lengthen duration.
Add to credit given attractive valuations, and stable economic environment in the near term.
Take a more balanced view on fixed versus floating rate securities given current valuations.
Relative to longer-term fixed income, the 0-3-year part of the yield curve is attractive. Three themes are guiding our investment views in the space:
Positioning
At the March Federal Open Market Committee meeting (FOMC), Federal Reserve Chair Jerome Powell emphasized the belief that inflation is on a sustainable, though bumpy, path back to 2%. In the updated dot plot from the FOMC, projections for 2025 and 2026 rose since the last meeting. We expect the first cut to come in June or July. Although there were no changes yet, quantitative tightening was a major topic of discussion with Powell saying the Fed expects to taper the pace of the balance sheet runoff soon.
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
.....
Emerging Markets
.....
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
Source: Bloomberg
As of 3/28/2024
-0.78%
-2.08%
1.47%
-0.09%
Total YTD Returns
U.S. Aggregate
Global Aggregate
U.S. Corporate HY
S&P Municipal Bond
.....
European Central Bank
.....
Standard & Poors
.....
High Yield
.....
United States
.....
United States
.....
United States
.....
Federal Open Market Committee
.....
United States
.....
Secured Overnight Financing Rate
.....
Money Market
.....
Institutional
.....
Producer Price Index
.....
European Central Bank
.....
third quarter
U.S. fixed income
International
The Global Aggregate Total Return Bond Index eked out a positive total return of 0.56% during March while remaining negative for first quarter 2024. Emerging markets bond returns also improved in March, extending their leadership momentum that began in 2023. The recent rise in U.S. rates and the de-pricing of Fed rate cuts has had little effect on EM assets, reflecting the reduced reliance on lower U.S. rates as a driver of performance.
.....
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
Percentages as of 3/31/2024
Source: Trading Economics.
Jobless
3.90
6.40
5.30
2.60
3.90
Inflation
3.20
2.60
0.70
2.80
3.40
Interest Rate
5.50
4.50
3.45
0.00
5.25
GDP QoQ
2.40
0.30
0.80
0.70
0.10
GDP Growth
3.40
0.00
1.00
0.10
-0.30
Country
United States
Euro Area
China
Japan
United Kingdom
Macro Dashboard
.....
Gross Domestic Product
.....
Gross Domestic Product
.....
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
.....
Bill Of Exchange
.....
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
.....
Private Mortgage Insurance
.....
Federal Reserve
.....
fourth quarter
.....
Bank of Japan
.....
Purchasing Managers Index
.....
Quarter over quarter
.....
Producer Price Index
.....
Consumer Price Index
.....
Kansas City
More mixed signals
.....
Institute of Supply Management
.....
Job Openings and Labor Turnover Survey
.....
Standard & Poors
.....
Composite
.....
Morgan Stanley Capital International
.....
Morgan Stanley Capital International
.....
Europe, Australasia, and the Far East
.....
Federal Open Mark
.....
United Kingdom
.....
United States
.....
Consumer Price Index
.....
Artificial Intelligence
.....
Consumer Price Index
.....
Standard and Poor's
.....
Bank of England
.....
Bank of Japan
.....
Bank of England
.....
Personal Consumption Expenditures
.....
Federal Reserve
.....
Gross Domestic Product
.....
Mortgage Bankers Association