Morgan Stanley IM: What the Yield Curve and the Dollar Are Telling Us
Fixed Income
Jim Caron, Co-Lead Global Portfolio Manager and Co-Chief Investment Officer, Global Balanced Risk Control Team, shares his macro thematic views on key market drivers.
19.04.2023 | 07:05 Uhr
This week we want to take a big picture macro look at two key
drivers of longer-term market dynamics: the yields curve and the U.S.
Dollar (USD).
From a U.S. domestic perspective the slope of the yield curve
provides a market-based pricing of Fed policy, inflation and by
extension GDP growth, economic conditions, labor, wages, etc.
From a global perspective it is important to look at the USD, which
is always topical, but extremely hard to forecast given the many
variables and co-dependencies.
The yield curve is priced to reverse much of its
inversion/flattening and steepen going forward, and the USD is trending
weaker. Both are macro signs of easier financial conditions or stimulus
ahead.
But, the consensus narrative for a more negative outlook still prevails. What gives?
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