The Outlook for Escalating Trade Tensions

Nathan Sheets, PhD, Chief Economist, Head of Macroeconomic Research

Recognizing that uncertainties regarding U.S./China trade tensions have multiplied, PGIM Fixed Income provides our perspective on recent developments, which are based on the question of: “what do we actually know?”

Countdown to Zero—The Final Chapters

Robert Tipp, CFA, Chief Investment Strategist and Head of Global Bonds

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.

Recent Thought Leadership

Frontier Case Study: Ecuador’s Path to Economic Sustainability

Francisco Campos-Ortiz, PhD, Lead Economist, Latin America, Macroeconomic Research Team, and Matthew Duda, CFA, Principal, Portfolio Manager, Emerging Markets Debt Team

This case study showcases PGIM Fixed Income’s investment approach to frontier markets, which includes a combination of macroeconomic fundamental analysis, insight into the political backdrop, and inferences from in-person discussions with key stakeholders. Ecuador’s adjustment program backed by the International Monetary Fund (IMF) has the scope to address key structural shortcomings that could materially strengthen the country’s macroeconomic fundamentals, while providing enough financing to avert any credit event over the life of the program—provided that it is successfully implemented. 

“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. Our base case is that the Fed will likely remain on hold for the foreseeable future. We 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.

Weekly View: Weighing Trade-Related Sensitivities

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