Countdown to Zero—The Final Chapters
The recent reduction in global growth, inflation, and long-term interest rates occurred faster than we expected. Therefore, our prior, already-below consensus long-term interest-rate forecast appears too high. As the countdown to zero across the developed markets progresses (more in real terms in the U.S. and more in nominal terms in core Europe and Japan, for example), this paper looks at the factors that have continued to push the interest-rate equilibrium lower and the market implications of an even lower-for-longer rate environment.
The Outlook for Escalating Trade Tensions
Recognizing that uncertainties regarding U.S./China trade tensions have multiplied, PGIM Fixed Income provides their perspective on recent developments, which are based on the question of: “what do we actually know?”
“Transitory” Brings Some Balance to Fed Outlook
The Fed’s statement released after its May policy meeting noted that inflation has declined and is running below the Fed’s 2% target. Powell's subsequent comments that the decline has been due to transitory factors threw cold water on the prospect of an impending rate cut. PGIM Fixed Income’s base case is that the Fed will likely remain on hold for the foreseeable future. They see the relatively stable growth backdrop, combined with the generally low levels of government bond yields, as contributing to an overall “search for yield” investment environment.
Implications of a U.S.-China Trade Deal: Who Wins? Who Loses?
In this essay, PGIM Fixed Income provides some perspectives on a U.S.-China trade deal, looks closely at the behavior of the U.S.-China trade imbalance, and how a trade agreement might affect the imbalance going forward.