28 Aug Fixed Income Perspectives – ‘Global Growth Misses Opportunity to Medal’
Voya Investment Management – Fixed Income Perspectives – August 2016
As the Olympics take center stage in the world of sport, only those paying attention may realize that the world’s athletic achievements are outdistancing its economic ones. Once the chalk dust cloud of uncertainty settled from the “Brexit” vote, a strong U.S. payrolls report early in July led to improved investor sentiment and put the possibility of an interest rate hike in 2016 by the Federal Reserve back on the table.
Then, the U.S. clipped a hurdle with the release of a paltry Q2 GDP print of 1.2%. After a brief jump, yields dove back down into the global pool of low interest rates with the 10-year U.S. Treasury hitting a record low in July. While the U.S. may not be in the deep end of this pool, where Germany and Japan have been anchored for some time, the global hunt for yield has the potential to drag it there. This leaves the U.S. with the lowest first half growth rate in over four years and a dangerously weak context to deliver another interest rate hike without any heat coming from the inflation cauldron.