Market Update: September 2023

Featured Market Data

Higher For Longer

The yield on the 10-Year US Treasury rose in August to its highest level since 2007. The month saw real yields rise even more and are now at the highest level since 2009. Real, or inflation-adjusted, yields reflect the difference between the expected levels of inflation and nominal Treasury yields. Myriad factors impact nominal and real yields including supply and demand. Nonetheless, the rise in real yields produces increasing restraint on the economy in the face of declining expected future inflation. More broadly, higher yields reflect investors’ belief that the Fed is likely to keep rates high and that the economy is unlikely to slow sharply in the near term.

Source: Bloomberg

Recent News

Hawkish Jackson Hole

Investors heard a more hawkish tone from Federal Reserve Chair Jerome Powell at the annual gathering of policymakers in Jackson Hole, Wyoming. In many ways, the message was the same as the Chair emphasized the Fed will remain data dependent as it determines the level of interest rates. The Chair acknowledged that returning inflation to the Fed’s 2% target may be challenging and “require a period of below-trend growth”. These remarks were made following months of faster than expected U.S. consumer spending growth, fueled by higher wages. Powell’s hawkish tone combined with continued consumer strength support the notion that the Fed may be slow to cut rates in the face of any economic slowdown.

Source: Wall Street Journal, Bloomberg

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