Thank you, Santa!
By: Tom Richmond, Co-Head of Taxable SMA Strategies, Senior Portfolio Manager
In honor of the recently completed holiday season, I hope you can indulge me for a moment for a story of good tidings, seasonal cheer, and apparently, redemption. Picture if you can a white-bearded, red-suited, jovial Chairman of the Federal Open Market Committee – as much of a stretch as that might be. For the past couple of years it appeared the Chair and other sleigh-pulling members of the Committee had judged both the U.S. economy and most bond market participants as being on the “Naughty’ list; in response they had delivered lumps of coal, in the form of aggressive short-term interest rate hikes, a reduced balance sheet, and endless hawkish rhetoric to try to slay inflation, slow the economy, and, in turn, they ended up punishing bond investors. Just in time for the 2023 holiday season, that judgement appeared to change, and both (the U.S. economy and most bond market participants) were moved to the ‘Nice’ list – leading to a plethora of gifts and overflowing stockings. As the Federal Reserve (Fed) pivoted in their rhetoric and seemed to signal the peak in rates for this cycle, the economy continued to chug along, better than most had expected at this time last year, and virtually all sectors of the bond market sang happy carols into year-end.
This is a snapshot view the full overview below.