October 25, 2024
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The Fed pivots: Lower rates, higher stakes
Key Takeaways
- Recent trends in inflation, employment, and gross domestic product (GDP) growth support a non-recessionary (soft landing) outcome.
- Forward interest rate curves suggest that investors are expecting rate cuts to be larger than rate cuts in historical non-recessionary environments.
- Equities have outperformed fixed income after the first non-recessionary cut, led by developed markets excluding the U.S.
- Fixed income (as measured by the Bloomberg U.S. Aggregate Bond Index) had positive returns in non-recessionary and recessionary rate cuts and outperformed equities when the recession odds approached 60%.
- Commodities have lagged following both recessionary and non-recessionary cuts.
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