Invest
Investors urged to be cautious of overstated US growth projections
Investors should be wary of projected US growth as optimism regarding inflation and the subsequent trajectory of the Federal Funds Rate may be overstated, investment managers say.
Investors urged to be cautious of overstated US growth projections
Investors should be wary of projected US growth as optimism regarding inflation and the subsequent trajectory of the Federal Funds Rate may be overstated, investment managers say.
According to Western Asset chief investment officer Ken Leech, the Federal Reserve’s upbeat outlook about growth, which seems to be shared by the bond market, may result in further volatility should a rate hike be implemented ahead of the market being ready.
“We view optimism about US growth as a bit overdone… we expect [it] to slow slightly next year with inflation remaining moderate,” he says.
“Global monetary policy will continue to play a major role in the recovery… We expect more volatility such as that we saw this year should central banks misjudge the market or mishandle communication regarding policy moves.”
Global investment company Legg Mason Investment says the real pace of economic growth is likely to dictate the movements of interest rates in 2019.
Although the 5-year, 5-year Forward Rate of the US Treasury mirrors such positive sentiment, suggesting a rate scenario significantly higher than the Fed’s current estimate of 3.1 per cent in 2019, investment managers say this might be reflective of optimistic bias inspired by strong US growth this year.
Francis Scotland, director of global macro research at Brandywine Global, says there are reasons to believe that growth could be more moderate as fiscal stimulus dwindles and rate hikes begin to sting.
“[T]he Trump tax cutting agenda has complicated the issue [of rate normalization] by rocketing American GDP growth higher, which could easily bias/pressure the Fed into thinking a rapid normalization is appropriate,” he says.
“But there are a host of reasons for believing that normalization will play out over a very long time frame.”
RELATED ARTICLES
Property
Australia’s rental squeeze is now a business problem: inflation, capacity and the new growth calculus
Record-low rental vacancies are no longer just a social headline – they’re reshaping cost structures, wage dynamics and capital allocation across corporate Australia. With economists warning of a ...Read more
Property
Rents Are Repricing Australia Inc: What record‑low vacancies mean for inflation, talent and strategy
Australia’s rental market has slipped into a vacancy desert, and it’s not just tenants feeling the heat. Persistently tight supply is pushing up rents, embedding services inflation and complicating ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Australia’s rental squeeze is now a business problem: inflation, capacity and the new growth calculus
Record-low rental vacancies are no longer just a social headline – they’re reshaping cost structures, wage dynamics and capital allocation across corporate Australia. With economists warning of a ...Read more
Property
Rents Are Repricing Australia Inc: What record‑low vacancies mean for inflation, talent and strategy
Australia’s rental market has slipped into a vacancy desert, and it’s not just tenants feeling the heat. Persistently tight supply is pushing up rents, embedding services inflation and complicating ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
