Kicking the Can Down the Road

Drew O’Neil and Doug Drabik discusses fixed income market conditions and offers insight for bond investors.

The world had a pandemic – COVID-19. This pandemic unfortunately and unbiasedly took lives, created widespread fear, and rocked the economic world. The U.S. threw a lot of money at this challenge, enacted government backstops to protect businesses and individuals, and intensified spending, all to keep the economy moving in a positive direction. Much of the action was likely necessary and consequences have emerged but is its path of economic impairment behind us or has its impact merely been kicked down the road?

It would be hard to argue that the Federal Reserve and government actions implemented during the COVID pandemic weren’t warranted. Shutting down businesses and interrupting services, which occurred to an extreme extent, carry potential catastrophic consequences. One could argue that these Federal Reserve and Government actions may have averted a longer recession if not a depression.

Now several years from the pandemic’s dawn but still dealing with its aftershocks, what does the economy look like? Is inflation under control? Have we averted a more vigorous recession? How is the Fed likely to interact with the markets? Are interest rates going to change? What about consumer behavior? What fixed income opportunities exist in light of our economic fate?

 US GDP Year over Year