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Rick Rieder Profile picture
@RickRieder
Apr 11, 2019 • 6 tweets • 5 min read • Read on X
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And just as monetary policy in the U.S. considers the weakest links in the global economic chain, we expect the #ECB to stay on a path of easy policy as they set out to accommodate the weakest links in the #Eurozone. Image
Hence, we like owning #assets with a low, or declining, cost-of-capital (r), as per the Gordon Growth Model, which given the posture of global central #banks, is the case in much of the world today… Image
…relative to a stable #growth trajectory (g), such as in the U.S. and in some emerging #markets. Image
We also like high-quality carrying #assets with some scarcity value, such as U.S. corporate #bonds, where supply this year is almost half of what it was three years ago. Image
At the same time, demand for corporate bonds is at multi-year highs, fueled by the #demographic need for #income. Image
Finally, to #hedge risky positions, we like owning U.S. Treasuries and dollars for similar scarcity reasons, as well as their now-entrenched negative #correlation to risky assets. Image

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More from @RickRieder

Rick Rieder Profile picture
Feb 13
Over the past few days, we’ve received information that is likely to hold an impact on the market’s perception of the trajectory of interest rates, and will have broader market influences as well. The Consumer Price Index (or #CPI) is the most followed of #inflation measures (it gained a greater than expected 0.47% on a headline month-over-month basis and 3.0% year-over-year), and particularly Core CPI (which excludes volatile food and energy components), which increased strongly at 0.45% month-over-month and 3.29% year-over-year.
Yesterday’s CPI report, as always, was interesting in that there was a mix of strength in some areas and trend-developments in others. Both Core CPI and Core Services (ex-shelter) displayed significant gains, while the shelter category picked up by a smaller amount. Even within shelter, the much-followed Owners’ Equivalent Rent measure (or OER) was well behaved at 0.31% month-over-month, but lodging saw a big gain after having declined in the previous month.Image
As a result, to us the most critical element in the recent CPI reports has in fact been OER, and the trajectory of shelter inflation. That’s because both we and the market had been expecting that figure to trend lower.
Read 9 tweets
Rick Rieder Profile picture
Feb 10
The world continues to watch for a pathway to lower interest rates, but despite a modestly softer headline in nonfarm payrolls last week, of 143,000 jobs gained, underlying employment conditions continued to display a resilience that makes any @federalreserve rate cutting in the near- to intermediate-term appear unlikely.
Indeed, at 0.48% month-over-month and more than 4% year-over-year the wage growth looked solid, unemployment declined slightly to 4.0%, and prior month payroll revisions were 100,000 jobs greater than previously reported. So, all in all, the labor markets still appear to be in a good place.
In our view, for a Fed rate cut to be back on the table, we would need to see two, or so, consecutively softer employment reports, and that is for the central bank to even consider resuming its rate cutting cycle.
Read 10 tweets
Rick Rieder Profile picture
Jan 16
As we have argued in recent months, a great deal of progress has been made in combatting high levels of post-pandemic inflation. Still, the likelihood is that most of the meaningful progress is behind us at this stage, and inflation may remain sticky at levels higher than the @federalreserve would ideally like.
Indeed, yesterday’s headline CPI increased 0.39% month-over-month, greater than its gains from last month, largely due to energy price gains. That resulted in headline CPI rising to 2.89%, from 2.75% the month prior, on a year-over-year basis, amid unfavorable base effects.
The core CPI measure gained 0.23% month-over-month, and 3.24% year-over-year. Taking a step back to provide some context, the average annual rate of core CPI inflation from 2000 through 2023 was 2.37%, but for 2024 this measure resided at 3.24%, illustrating vividly why the #Fed wants to see further progress on #inflation.
Read 11 tweets
Rick Rieder Profile picture
Jan 13
What a way to kick off 2025!
Last Friday’s #JobsReport gave us more revealing data on the status of the jobs market in the U.S. at this stage, and it certainly continued to describe an economy in very healthy shape.
The evolution of hiring conditions is something that we are very focused upon, and we will continue to be so over the coming weeks and months. With a new Administration coming in, policies such as immigration reform, government hiring (or closures and layoffs), and incentives to spend more aggressively in places like in energy, will influence the ‘to and fro’ of job-demand in the country.
And furthermore, the @federalreserve has cited- almost as perquisite- that softness in labor conditions would have to be in place to continue to move the Fed Funds policy rate to lower levels, and we didn’t see a lot of motivation for in this data.
Read 11 tweets
Rick Rieder Profile picture
Dec 19, 2024
Yesterday’s @federalreserve move signals something of an ending to a story that has played out for several months now, in terms of the Fed’s rate cutting cycle, associated with what were significantly restrictive interest rates.
The #FOMC cut policy interest rates by a quarter-point, to the 4.25% to 4.50% range, and communicated more #hawkishly through the updated dot plot/Summary of Economic Projections (SEP), as well as during the Chair’s press conference. To us, this suggests that we’ve entered a new phase of the rate cutting cycle.
We have often argued that the more elevated Funds rate creates great pressure on lower income cohorts through the housing, credit card, and auto finance channels than is worthwhile at this stage, particularly given where inflation has decelerated to.
Read 9 tweets
Rick Rieder Profile picture
Nov 14, 2024
As usual, today’s #CPI report created great anticipation and then introspection upon its release. It’s always amazing that a few basis points (bps), one way or the other, can have such a large impact on market perception, and presumably on the interpretation of how the @federalreserve will react to such a number.
The truth, however, is that the #Fed considers a multitude of #inflation readings, with a higher emphasis on the Core PCE measure. Yet, we find ourselves at a point in time where the range of outcomes for inflation related to recently solid economic growth, to newly elected political officials, and to the consequential potential for higher tariffs and higher levels of growth, etc., has led to an enormous focus on this number.
To that end, today’s report showed still firm inflation readings of 0.28% month-over-month, and 3.33% year-over-year for Core CPI (which excludes the volatile food and energy components) and 0.24% and 2.60% for headline CPI, over the same time periods.
Read 10 tweets

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