Markets and Economy
The Next Normal: JFG'S 2024 Fixed Income Outlook
3 minute read time
For investors, the defining characteristic of the post-Great Financial Crisis period from 2009 to 2019 was low interest rates—some would say artificially low interest rates. The Federal Reserve kept short-term rates near zero to support the economy during a long period of slow but stable economic growth while inflation remained stubbornly below central banks’ targets. This low growth, low-rate period was dubbed by some the “New Normal.”
The path to policy normalization that began with modest rate hikes from 2017-2019 was famously interrupted by the 2020 Covid pandemic, when central bank action and unprecedented fiscal policy support combined with supply chain disruptions to unleash the highest inflation since the 1980s. The 10-year Treasury yield, which had fallen below 1% during the depths of the crisis, began a rapid ascent as the Fed began the fastest interest-rate hiking cycle since the 1970s. The 10-year peaked at 5% in October of last year, just below the Fed Funds rate, which now sits in a range between 5.25%-5.50%.
We begin 2024 by shifting our focus to the future and navigating the Next Normal, which we believe will look more like the pre-GFC period.
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