Thus far, 2017 has proved to be somewhat of a vexing year for investors expecting to see a higher U.S. rate environment. While the Federal Reserve (Fed) has delivered on its front by pushing up short-term interest rates, longer-dated yields such as the U.S. Treasury (UST) 10-Year note have not followed suit.
Last week, President Trump announced his appointment for the next Federal Reserve (Fed) chair, current Fed governor Jerome Powell. The news was widely telegraphed, and the bond market barely felt a ripple as a result. However, earlier this week, another revelation regarding Fed leadership made headlines, as current N.Y. Fed president William Dudley announced his plans to retire in the middle of next year. With the retirement of vice chair Stanley Fischer last month, two of the three top spots at the Fed will now need to be filled.
With three-quarters of calendar year 2017 now in the books, investors may wonder where the U.S. economy goes from here. Last week, the Bureau of Economic Analysis reported that third-quarter real GDP rose at an annual rate of +3.0%, following on the heels of a +3.1% reading in the second quarter. This was the best back-to-back quarterly performances in exactly three years. Is there any type of gauge that could help investors, or perhaps at least provide some guidance on what could be looming ahead?
The ECB: Moving the Goalposts or Real Tapering?
The focus of global financial markets has returned to the ECB, raising the question: is the result of its recent meeting the beginning of a normalizing process (tapering), or just an adjustment to its existing bond buying program (moving the goalposts)?