The Big Picture by John Fekete: Tapering is on the Way. But What About Rate Hikes?

September 2021 – John Fekete, Crescent Capital’s Head of Tradeable Credit, discusses the state of the U.S. economy and the outlook for debt markets.

July jobs data showed the US economy added 943,000 workers, with the unemployment rate dropping to a pandemic low of 5.4%. GDP growth is expected to be mid-to-high single digits this year, while defaults in the US high yield bond market are trending to 2% or lower. Investors might reasonably expect Fed balance sheet tapering to commence, quickly followed by interest rate hikes. However, US payrolls are 5.7 million jobs short of pre-pandemic levels, suggesting there’s a good amount of labor market slack to work through.

Read the full commentary here.