Fynsa
In our 2024 Asset Allocation Outlook, bonds emerge as a prominent asset class.
The data indicate that we appear to be reaching the peak of this tightening cycle, as highly restrictive financial and credit conditions will begin to be felt more strongly in activity in the coming quarters.
We believe there is an opportunity in distressed debt, where the less liquidity we find in the market, the greater the pressure these managers can exert on an asset’s purchase price.
Although the Fed chair “kept open” the possibility of raising rates at future meetings, it appears that rates will remain unchanged after the next meeting.
Historically, fixed-income securities begin to outperform cash before the Federal Reserve reaches its peak interest rate.
In our base case, we expect some moderation in U.S. interest rates in the coming months and recommend considering moving gradually out of cash into longer maturities and corporate bonds.
The expected drop in the price of the dollar to the vicinity of 800 should not occur until next year.
The Fed's actions led to a significant sell-off in dollar rates, with the 10-year treasury rate at a high of 4.50%, a level not seen since 2007.
We can expect that, as far as possible, the next cuts in the TPM will remain in the more conservative range of the corridor presented in the last IPoM.
Any of the last 3 months of core inflation in the U.S. has been the softest reading since September 2021.
