- Lower trend growth underpins our expectation for range-bound interest rates.
- Our secular baseline outlook foresees a recession – not imminent, but likely over the next three to five years.
- Central bank policy rates should go to zero quickly in such a scenario and stay there for an extended period.
- Downside risks to the economy – from more tariff action, trade wars, growth shocks or declining confidence –may loom large.
- The U.S. has the highest yields globally from which to benefit while gaining diversification away from higher risk assets. It also has the most room for rates to fall in the wake of a downside risk materializing.
Bottom line: U.S. interest rate exposure may offer longer term capital appreciation potential, and may be the best way for investors to hedge credit or equity risk in portfolios today.
Read more on our outlook for rates >