By Davide Barbuscia and David Randall NEW YORK (Reuters) - The Federal Reserve’s plans for a prolonged period of elevated interest rates could continue ...
By Davide Barbuscia and David Randall NEW YORK - The Federal Reserve’s plans for a prolonged period of elevated interest rates could continue pressuring stocks and bonds in coming months,By Davide Barbuscia and David Randall
Broadly speaking, higher rates for longer could be an unwelcome turn of events for stocks and bonds. The benchmark U.S. Treasury yield, which moves inversely to bond prices, already stands at its highest since 2007 after surging in recent months, and could continue climbing if rates remained high. "There’s now a wider range of potential outcomes for when rate cuts are going to come, and that sets up the potential for increased volatility as we head into year end," said Josh Jamner, investment strategy analyst at Clearbridge Investments.
"It looks as though the Fed is trying to send as hawkish a signal as it possibly can. It's just a question of whether the markets will listen to them," said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities USA. “If the economy starts to soften, I don't think these dot-plot projections will actually hold up.
These include higher energy prices, an auto workers strike launched last week, the possibility of a government shutdown, and an end to the moratorium on student loan repayments. Signs of wobbling growth could bolster the case for the central bank to cut rates far sooner than it had projected. “I don’t think there’s much room for yields to go higher, so as a long-term investor … you should be adding more duration risk at these levels and use any selloff to actually add duration risk,” he said.
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