Navigating the bond market ahead of Fed rate cuts

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Bond Market Nouvelles

Bryan Whalen,Federal Reserve,Interest Rate

Stocks (^GSPC, ^DJI, ^IXIC) and Treasury yields (^TNX ^TYX, ^FVX) are negatively correlated for the first time since the 2023 regional banking crisis...

) in the markets and a potential interest rate cut on the agenda for the Federal Reserve's September policy meeting, how should investors navigate the bond market?

Uh But at the same time, more importantly, and to your point, which is the the price movement of bonds.So, you know, as equities go down bond prices more likely than not will go up and it kind of provide that diversification to uh to an overall portfolio.Uh Right, We've come about 100 basis points in the front end.

Uh We think, you know, the, the market over time over the fall will start to kind of coalesce around the idea that this economy is slowing a lot quicker, uh that was priced in at least in the first half of the year. And so if you think about the, you know, kind of our forecast and what's starting to be more people kind of coming into, into this uh idea that the of a recession might be, um you know, coming up in the in the near future, um equities will not do well in that environment and therefore high yield bonds will probably not do well as well.

And so that has kind of shaken, I think investor confidence and you saw quite a bit of volatility on that, although we've settled in. Uh And then so once you, once that narrative takes hold, you'll probably start to see more companies um, make layoffs at a faster rate than we've seen in a long period of time.

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