Are We at or Near Peak Yields for Risk Assets?

 | Jul 20, 2023 12:42

The future’s still uncertain, of course, and so all forecasts should be viewed cautiously. For perspective, let’s start with the one thing we know is true: We’re closer to the peak than we were in the previous update (May 5) for this periodic profile of trailing 1-year yields of the major asset classes. The mystery, as always, is the exact date of the upcoming peak.

It’s notable that there’s rising confidence among economists for predicting that the Federal Reserve will lift rates one last time at the July 26 FOMC meeting. The central bank “will raise its benchmark overnight interest rate by 25 basis points to the 5.25%-5.50% range on July 26, according to all 106 economists polled,” Reuters reports. A majority expect that the expected hike will be the last for the current tightening cycle.

A one-and-done outlook for interest-rate hikes is also the expected path ahead, according to Fed funds futures, based on data published by CMEgroup.com. Consider, too, that the average yield for the global risk assets dipped again based on a set of ETFs. Today’s update indicates that the trailing 12-month yield for the major asset classes slipped to 3.76% — the third straight decline for these updates.