"I think most of this volatility comes from the reality that market participants of all sizes are seeing mixed signals from hard and soft indicators. Whether we're talking about the jobs market, the U.S. dollar, inflation or GDP growth, each and every monthly report brings plenty of head-scratching. Personally, I'm not necessarily a fan of the near-term moves we're seeing in rates, but the direction does seem to want to trend lower."
"That's the most important factor I think the Federal Reserve is likely to be focused on for the remainder of the year, considering the material weakness we're now seeing in most areas of the economy. Outside of healthcare and some pockets of the construction and hospitality industry (which are still somewhat recovering from the pandemic), it's pretty much red across the board every print."
Persistent fixed-income volatility is expected through 2026 due to conflicting hard and soft economic indicators. Monthly reports on jobs, the U.S. dollar, inflation, and GDP produce mixed signals. The labor market shows broad weakness outside healthcare and some construction and hospitality pockets. Layoff announcements are surging, and population-adjusted payroll gains are insufficient for new workforce entrants. Declining participation and seniors' potential return to work could worsen unemployment metrics. If job conditions deteriorate, the Federal Reserve is likely to emphasize employment stability, increasing the probability of lower interest rates. Lower rates could make fixed-income allocations appealing in 2026.
Read at 24/7 Wall St.
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