April Investment Perspectives
Bank Fallout Risks Economic Contagion
Mark Luschini, Chief Investment Strategist
The economic landscape continues to wrinkle as the lagged effect of the Federal Reserve’s rate hike in March 2022—the first since 2018—and subsequent hikes gain traction.
In last month’s issue, we discussed the strength of the labor market as the key to postponing a recession, should one develop resulting from the Federal Reserve’s ratehiking campaign designed to thwart inflation by cooling demand. While we continue to believe that to be the case, recent events unfolding in the banking sector have presented a new twist to evaluate in the context of its spillover to the broader economy.
A Volatile Yield Curve
Guy LeBas, Chief Fixed Income Strategist
For decades, investors and economists have relied on the shape of the yield curve as an indicator of fundamental growth prospects and financial risk-taking.
During the course of the last 12 months, that shape has changed wildly—as fast as at any point in the last 40 years. For simplicity’s sake, we often focus on the difference between 2-year and 10-year maturities in evaluating the shape of the yield curve, also known as the “2s/10s spread.”
Lessons Apparently Never Learned
Gregory M. Drahuschak, Market Strategist
Advice most often attributed to Winston Churchill says: “Those that fail to learn from history are doomed to repeat it.” In the investment world, not learning from history can be costly.
Of all the mistakes investors might make, reaching too far for yield is the worst and it often occurs in situations least able to withstand the potentially negative consequences.
The information herein is for informative purposes only and in no event should be construed as a representation by us or as an offer to sell, or solicitation of an offer to buy any securities. The factual information given herein is taken from sources that we believe to be reliable, but is not guaranteed by us as to accuracy or completeness. Charts and graphs are provided for illustrative purposes. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors.
The concepts illustrated here have legal, accounting, and tax implications. Neither Janney Montgomery Scott LLC nor its Financial Advisors give tax, legal, or accounting advice. Please consult with the appropriate professional for advice concerning your particular circumstances. Past performance is not an indication or guarantee of future results. There are no guarantees that any investment or investment strategy will meet its objectives or that an investment can avoid losses. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. A client’s investment results are reduced by advisory fees and transaction costs and other expenses.
Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within. From time to time, Janney Montgomery Scott LLC and/or one or more of its employees may have a position in the securities discussed herein.
About the authors
Chief Investment Strategist, President and Chief Investment Officer, Janney Capital Management
Read more from Mark Luschini
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