Latest news with #TreasuryBond
Miami Herald
02-06-2025
- Business
- Miami Herald
Jamie Dimon flags critical risk to US economy
There is growing debate over whether the U.S. economy is on its way to a reckoning. Some worry that sticky inflation due to newly instituted tariffs will cause households and companies to retrench, sending the economy into stagflation, or worse, recession. Others worry that America's seemingly insatiable appetite for spending has us on an unsustainable path. Eventually, investors will stop buying our debt, causing interest rates and our deficit to swell even more. Related: JPMorgan updates Fed interest rate cut outlook Among those sending warning messages are some of the most influential capitalists of our time, including Ray Dalio, Stanley Druckenmiller, and Paul Tudor Jones. Each is a legendary hedge fund manager with over forty years of experience navigating markets and the economy, and all three have said they're concerned with the growing U.S. debt pile. They're far from the only ones raising a red flag over the risks. JP Morgan's influential CEO Jamie Dimon has joined the chorus, raising the specter of another potentially underappreciated risk to our economy. Bloomberg/Getty Images In 2020, the Fed and Congress unleashed a torrent of monetary and fiscal support to keep America from falling into a COVID-driven depression. Zero-interest rate policy, or ZIRP, and multiple stimulus payments worked, accelerating GDP sharply out of its steep downturn. However, the spending tsunami also unleashed inflation, which rocketed up to 8% in 2022. Related: Housing market chief Pulte sends blunt message on Fed interest rate cuts Soaring inflation surprised the Fed, given that Fed Chair Powell infamously called it transitory. Eventually, he was forced to embrace the most hawkish pace of Fed interest rate hikes since the 1980s to get inflation under control. Powell's war on inflation successfully wrestled inflation back below 3%. However, progress has slowed and higher rates have taken a bite out of the jobs market, given that unemployment has edged up to 4.2% from 3.4% in 2023. The Fed switched gears again to shore up the jobs market, cutting interest rates last September, November, and December. However, those cuts have yet to boost employment, and the Fed has shifted to the sidelines on additional cuts this year amid growing concern that new tariffs may reignite inflation in the second half of 2025. This dynamic has lodged the Fed firmly between a rock and a hard place. It cannot raise rates without risking recession if inflation rises, or cut rates without risking inflation if unemployment continues climbing. The situation has drawn fierce criticism from President Donald Trump, who referred to Powell as Mr. Too Late last month, arguing rates should be cut now, not later. Others in the administration, including Treasury Secretary Scott Bessent and FHFA housing chief Bill Pulte, have similarly argued for rate relief. The economic uncertainty has caused Treasury Bond yields to increase this year, despite the Fed's cuts late last year. For example, the 10-year Treasury Note yield has risen to nearly 4.5% from below 3.7% last September. The rising yields are good news for those pocketing higher yields from money market accounts or Treasury bond portfolios. But they're downright bad news for just about everyone else, especially those with credit card debt or would-be homebuyers shopping for a mortgage. Related: Jamie Dimon sends terse message on stocks, economy The uncertainty associated with the economy has also started to impact household and business spending decisions. Consumers are shifting spending to essentials and pausing discretionary purchases. Meanwhile, businesses are rethinking expansion plans while they await trade negotiation outcomes. The dynamic may worsen if bond markets get unhinged. In good times, companies (and the rest of us) pay a smaller percentage spread to Treasury yields to borrow, keeping our costs low. In bad times, the spread widens, increasing costs, sometimes to a point where it forces tough decisions, like forgoing a purchase or business investment. A widening of credit spreads appears to be firmly on Jamie Dimon's mind. His role at the largest U.S. and fifth-largest global banks by assets gives him unprecedented insight into what's keeping business leaders awake at night. "If people decide that the U.S. dollar isn't the place to be, you could see credit spreads gap out; that would be quite a problem," said Dimon in an interview with Fox Business. A "gap out" would mean a widening in the interest borrowers pay above Treasuries. The implications of wider spreads would be far-reaching, especially if spreads widen as Treasury yields rise because buyers are wary. "It hurts the people raising money. That includes small businesses, that includes loans to small businesses, includes high yield debt, includes leveraged lending, includes real estate loans. That's why you should worry about volatility in the bond market," said Dimon. Dimon didn't set a clock to when such a widening may happen, but his range of possibilities includes later this year. "It's a big deal, you know it is a real problem," said Dimon. "I don't know if it's six months or six years." The federal government's budget deficit is running at roughly $2 trillion annually. Dimon has a simple solution to reduce the risk that a loss of confidence will have ripple effects throughout the government and corporate bond market: Grow the economy. "The real focus should be growth, pro-business, proper deregulation, permitting reform, getting rid of blue tape, getting skills in schools, get that growth going – that's the best way," said Dimon. Related: Veteran fund manager who predicted April rally updates S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
06-05-2025
- Business
- Yahoo
5 Money-Making Lessons You Can Learn From Billionaire Michael Bloomberg
Michael Bloomberg is a media tycoon worth over $100 billion. He's currently the 16th richest person in the world, according to Forbes. He was also the mayor of New York City from 2002 to 2013, and continues to donate billions through his philanthropic efforts. Read More: 3 Signs You've 'Made It' Financially, According to Financial Influencer Genesis Hinckley Find Out: The New Retirement Problem Boomers Are Facing But Michael Bloomberg didn't just wake up a billionaire one day without putting in hard work over several decades. And though attaining billion-dollar status may be out of reach for most, we can study successful entrepreneurs to take away valuable lessons that can help us similarly build wealth. Bloomberg has built most of his fortune from his media company, but there are some strategic moves he's made over the life of his career that we can draw lessons from. Here are a few of the most impactful money-making lessons from Michael Bloomberg. Treat Your Job Like Your Own Business After graduating from Harvard Business School in 1966, Bloomberg got a job at Salomon Brothers — a Wall Street firm. He started at an entry-level position, but then became a bond trader. He eventually made partner, but was later demoted to run the computer systems department. Bloomberg took his knowledge of business and information systems to build out smart computer information systems for Salomon. His success came from hard work and ultimately treating Salomon like his own business. He knew that giving traders access to real-time information could help them make smarter trades — and he was right. Discover Next: Get Paid To Watch Videos: 11 Easy Ways Take Big Risks, Move Quickly Eventually, Salomon was sold to publicly-traded company Phibro Corporation, and Bloomberg was asked to leave. To buy out his equity, Phibro paid out a $10 million severance to Bloomberg. Using $4 million of the severance and the knowledge he gained as a bond trader and information systems manager at Salomon, Bloomberg quickly started up his own company. Innovative Market Solutions was launched in a 10′ x 10′ room with a few friends who previously worked for Salomon. He knew that he wanted to build the industry's foremost trading information terminal, and — using his electrical engineering background — built a terminal that gave traders access to information on the Treasury Bond market. He eventually sold 22 MarketMaster terminals to Merrill Lynch and received a $30 million investment for a 30% stake in the company. His risk-taking and fast moves to stay ahead of the technology curve paid off.
Yahoo
30-04-2025
- Business
- Yahoo
Bond ETFs Rise on Plunging Consumer Confidence
Inflation is no match for falling consumer confidence, as evidenced by this week's falling Treasury yields and rising bond ETF prices. The latest reading of the Conference Board's Consumer Confidence Index notched 86 for April, reaching its lowest point since May 2020, when Covid-19 fears were peaking. This downturn is largely attributed to escalating trade tensions and growing economic uncertainty, leading investors to seek safer assets and recession hedges, resulting in increased demand for long-duration Treasury ETFs. For example, the iShares 20+ Year Treasury Bond ETF (TLT) is up about 4.5% in the past five trading days and the more rate-sensitive Vanguard Extended Duration Treasury Index Fund ETF (EDV) has risen nearly 7% in the same period. These gains reflect falling Treasury yields, as markets anticipate potential Federal Reserve rate cuts in response to recession fears. At the start of President Donald Trump's second term, many Americans were optimistic about economic growth, buoyed by promises of tax cuts and deregulation. However, the administration's aggressive tariff policies have since sparked widespread concern. The imposition of sweeping tariffs on April 2, 2025, led to a significant stock market downturn, with the S&P 500 falling over 10% in two days in anticipation of higher inflation. Bond ETF prices followed stocks lower as inflation pushes up yields, which have an inverse relationship to prices. Falling consumer confidence can itself precipitate a recession. As individuals cut back on spending due to economic uncertainty, businesses may reduce hiring or lay off workers, further dampening economic activity. The ongoing trade war exacerbates this cycle by increasing costs for businesses and consumers alike. Small businesses, in particular, are feeling the strain, with many reporting reduced demand and rising input costs. The bond market reflects these concerns, with investors flocking to long-term Treasury securities, driving yields down and prices up, hence the gains for rate-sensitive Treasury bond ETFs like TLT and EDV. This trend indicates a market expectation of slowing economic growth and potential Federal Reserve intervention to stimulate the economy. In summary, the combination of aggressive trade policies, inflation fears, and declining consumer confidence is creating a challenging economic environment in 2025. The situation underscores the interconnectedness of policy decisions, market reactions and public sentiment in shaping economic | © Copyright 2025 All rights reserved
Yahoo
30-04-2025
- Business
- Yahoo
Bond ETFs Rise on Plunging Consumer Confidence
Inflation is no match for falling consumer confidence, as evidenced by this week's falling Treasury yields and rising bond ETF prices. The latest reading of the Conference Board's Consumer Confidence Index notched 86 for April, reaching its lowest point since May 2020, when Covid-19 fears were peaking. This downturn is largely attributed to escalating trade tensions and growing economic uncertainty, leading investors to seek safer assets and recession hedges, resulting in increased demand for long-duration Treasury ETFs. For example, the iShares 20+ Year Treasury Bond ETF (TLT) is up about 4.5% in the past five trading days and the more rate-sensitive Vanguard Extended Duration Treasury Index Fund ETF (EDV) has risen nearly 7% in the same period. These gains reflect falling Treasury yields, as markets anticipate potential Federal Reserve rate cuts in response to recession fears. At the start of President Donald Trump's second term, many Americans were optimistic about economic growth, buoyed by promises of tax cuts and deregulation. However, the administration's aggressive tariff policies have since sparked widespread concern. The imposition of sweeping tariffs on April 2, 2025, led to a significant stock market downturn, with the S&P 500 falling over 10% in two days in anticipation of higher inflation. Bond ETF prices followed stocks lower as inflation pushes up yields, which have an inverse relationship to prices. Falling consumer confidence can itself precipitate a recession. As individuals cut back on spending due to economic uncertainty, businesses may reduce hiring or lay off workers, further dampening economic activity. The ongoing trade war exacerbates this cycle by increasing costs for businesses and consumers alike. Small businesses, in particular, are feeling the strain, with many reporting reduced demand and rising input costs. The bond market reflects these concerns, with investors flocking to long-term Treasury securities, driving yields down and prices up, hence the gains for rate-sensitive Treasury bond ETFs like TLT and EDV. This trend indicates a market expectation of slowing economic growth and potential Federal Reserve intervention to stimulate the economy. In summary, the combination of aggressive trade policies, inflation fears, and declining consumer confidence is creating a challenging economic environment in 2025. The situation underscores the interconnectedness of policy decisions, market reactions and public sentiment in shaping economic | © Copyright 2025 All rights reserved Sign in to access your portfolio
Yahoo
29-01-2025
- Business
- Yahoo
Federal Reserve's Rate Hold Briefly Rattles ETF Markets
The Federal Reserve's decision to hold interest rates steady Wednesday initially sent ETFs tumbling before markets staged a comeback, with the Invesco QQQ Trust (QQQ) trimming losses to just 0.2% by late afternoon. The Fed's move to maintain rates at 4.25-4.5% highlights the ongoing balancing act between controlling inflation and supporting economic growth, a dynamic that continues to shape ETF investor strategies across sectors from bonds to equities, particularly as markets adjust expectations for future rate cuts. According to Kent Thune, research lead, the Fed's decision was widely anticipated, with the CME FedWatch tool forecasting a 99.5% chance of a rate pause today. The SPDR S&P 500 ETF Trust (SPY) recovered from steeper losses to trade down 0.5%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) showed resilience, falling just 0.3%, according to data. The Federal Reserve cited solid 'economic activity' and 'somewhat elevated' inflation in its decision to maintain current rates, according to the central bank's 2 p.m. ET statement. During a press conference following today's Federal Reserve Open Committee meeting, Fed Chair Jerome Powell offered a potentially encouraging outlook, stating, 'we do expect to see further progress in inflation,' while repeatedly emphasizing a 'wait and see' approach to future policy decisions. Treasury yields have climbed 25% higher since September when the Fed began its current easing cycle, reflecting the bond market's heightened sensitivity to rate decisions, said Thune. The bond markets appeared to welcome Powell's subsequent press conference comments, with the iShares 20+ Year Treasury Bond ETF (TLT) trading just 0.2% lower after recovering from deeper losses. Powell also indicated during the briefing that the economy grew about 2% in 2024 while housing activity has stabilized, suggesting the Fed's previous rate hikes have achieved their intended effect without triggering a recession that many analysts had feared earlier in the tightening | © Copyright 2025 All rights reserved
