Bond Market Observations: Déjà vu, All Over Again

The late, great Yogi Berra was right, and we have been here before. Global economic growth is running above its longer-term trend, inflation in advanced economies is poised to rise, and the Federal Reserve will travel further up the firming path than commonly understood (with some other major central banks trailing behind). That has been our story for some time and, if anything, events over the past month give us more reason to stick to it.

Part of this is data. In advanced economies, economic releases mostly ran better than expected, purchasing managers see their order books bulging, and now-casts of global GDP growth are firming. Partly this is about politics. President Trump scored a legislated victory with the passage of tax reform and the warring parties in Congress managed to keep the government running after only a short shutdown. The former imparts a modest boost to growth, reinforcing the impetus associated with ongoing deregulation, and both lessen the chance that the White House will resort to major counter-productive executive actions on trade.

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