Investors in the bond market are struggling to find economies that look good from 30,000 feet above the ground, but not so much closer to the ground. Despite Thursday’s drop, U.S. Treasury yields have been rising sharply over the past month or so, contributing to the drag on stock prices this week. Various reasons have been cited, but one of the most common is the much-touted idea that the Federal Reserve can use high interest rates to control inflation without destroying the entire economy. The simple idea is that we are getting closer to achieving a soft landing. Higher growth expectations generally lead to higher bond yields. Almost all recent macroeconomic data supports this theory. Whether you look at salaries, gross domestic product, retail sales, or any number of other metrics, growth at least looks solid. On Thursday, it said layoffs were not accelerating, the Atlanta Fed pegged third-quarter GDP growth at 3.4%, and recent retail sales data showed consumer spending was holding up. New news has been brought. Economists at Goldman Sachs believe the strong growth outlook is pushing yields higher as traders sell safe-haven bonds. The investment bank said the reason for this is more likely than other commonly cited factors, such as rising expectations for Donald Trump’s victory in the presidential election and concerns that the Fed’s interest rate cuts will reignite inflation. said that it was high. “Yields have risen significantly over the past few weeks, but we find that this is primarily due to continued strong growth momentum in the U.S., rather than changes in election probabilities,” Goldman said in a recent note. ” he said. In fact, Goldman believes the Fed will continue to cut interest rates, cutting rates by 25 basis points in each of its six meetings between now and next June. Still, all the fanfare about macro data is accompanied by other indicators of cracks in the floor. The Fed’s Beige Book, released on Wednesday, was largely ignored on Wall Street, but it drew a lot of attention from strategists and economists commenting on the overall bearish tone. The report, released every seven weeks, is a compilation of what business executives are telling their local Fed officials about business conditions. Broadly speaking, respondents said economic growth has remained “little changed” since the last report was released in early September. But looking under the hood, manufacturing appears to be “in decline,” banking activity appears to be slowing, commercial real estate is “generally flat,” while both the agricultural and energy sectors are It reports that the situation is flat to “moderately declining.” The employment situation was also nothing to be proud of, with more than half of the 12 Fed regions seeing “slight or modest increases” in employment, although there were few signs that layoffs were accelerating. Next is the election. The highly competitive presidential election drew more than a dozen mentions in the Fed’s report, most of which reflect reluctance to commit to new investments until the outcome is known, but could present an opportunity. Some people say that there is something wrong with it. The general outlook is concerning on Wall Street, with Citigroup economist Andrew Hollenhorst writing that the Beige Book “has not shown any significant improvement in an overall bleak outlook.” “In contrast to the strong September jobs and retail sales report, anecdotes from the Fed’s Beige Book show little economic growth in much of the country,” said Kathy Bosjancic, chief economist at Nationwide. I didn’t draw it,” he wrote. Peter Boockvar, chief investment officer at Bleakley Financial Group, said: “My only conclusion is: This means that huge government spending exceeds the income of the people.” $1.8 trillion, or about 6% of GDP, completely skews the overall data. ” Market turmoil has pushed yields up more than 50 basis points in just over a month since the Federal Reserve cut its benchmark interest rate by 50 basis points (0.5 percentage point). If the economy improves, the Fed may be deterred from cutting interest rates too quickly, fearing that growth will become too high and inflation will pick up again. But if growth worsens, as the Beige Book suggests, the Fed is likely to move toward further rate cuts. In a September press conference, Fed Chairman Jerome Powell emphasized the Beige Book as a yardstick for policymakers to follow in deciding how to implement September’s deep interest rate cut. “Overall, based on our interactions with regional officials, the Fed’s most likely assessment is to continue lowering rates in the coming months to achieve a ‘soft landing,'” said Nicholas Colas, co-founder of Datatrek Research. It means there is a need.” “Despite recent stronger-than-expected data on U.S. employment, retail sales, and consumer inflation, the Fed’s latest Beige Book suggests the economy remains weak.”
