This week's Federal Open Market Committee (FOMC) meeting will provide insight into the policy committee's thinking about the post-Brexit economy. Since the last FOMC meeting in June, U.S. economic data has come in consistently stronger than expected and risk markets have rallied. The tightening in credit spreads since the Brexit vote has been dramatic in some sectors of the fixed income market, and U.S. equities have hit new highs. Despite these positive factors, it is likely that the Fed will keep interest rates unchanged and hopefully strike a careful balance of future guidance given the uncertainty of future global growth.
Given the stronger economic data and leading inflation indicators pointing to an uptick, I expect inflation readings to increase. Leading indicators of future inflation have trended upward over the past few months despite the market pricing in lower and lower future inflation readings. This divergence will come to a head over the next six months. In this environment I prefer Treasury Inflation Protected Securities (TIPS) over nominal Treasury bonds.
-----
Tomorrow, Penn Mutual Asset Management will be hosting a ground-breaking event on The State of State Pensions at 12 noon at the Hamilton Garden in Kimmel Center. I will be participating in a panel discussion to explore this issue, along with such distinguished panelists as the Honorable Martin O’Malley (no relation), Former Governor, Maryland; the Honorable Stephen Sweeney, Senate President, New Jersey; and the Honorable Richard Ravitch, Former Lieutenant Governor, New York.
Please join us for the panel, if you can. Register here.
< Go to Monday Morning Perspectives
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.
