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Higher for longer isn't just for interest rates anymore
Please read important information at the end of this program. Recorded on 10/19/2023
[Joe Quinlan speaking throughout]
HFL... It may sound like a new sports league. But it's actually a trend we believe will shape the investment landscape for the next several years.
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Joe Quinlan, Head of CIO Market Strategy, Chief Investment Office, Merrill and Bank of America Private Bank
Hi, I'm Joe Quinlan, with a look at what HFL -- which stands for "higher for longer" -- could mean for the markets and for your portfolio.
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A "Higher-for-Longer (HFL) world"
- Interest rates
First up, interest rates. A tight labor market, strong wages and elevated energy prices are help keeping inflation higher than the Federal Reserve's target range, likely dashing hopes of any rate cuts any time soon.
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A "Higher-for-Longer (HFL) world"
- Global energy prices
Next, global energy prices are being fueled by rising geopolitical tensions, along with oil production cuts and tighter supplies heading into the colder months.
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A "Higher-for-Longer (HFL) world"
- Global defense spending
- U.S. budget deficit
- Political discourse in DC
Also on the HFL list: global defense spending, the U.S. budget deficit and the pitch of political discourse in Washington
So, what does this mean for investors?
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Higher rates should be favorable for cash and fixed income
On the positive side, higher rates should be favorable for cash and fixed income.
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Elevated oil prices could boost energy stocks and commodities
Elevated oil prices could boost energy stocks and commodities, such as metals and minerals.
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Strong defense spending could help equities in defense and cybersecurity
And strong defense spending may help equities in defense and cybersecurity.
On the other hand, the growing deficit could weaken the U.S Dollar and Washington politics could weigh on consumer and business confidence.
For more, read our Capital Market Outlook for October 10th. And if you're working with an advisor, check with them about what these insights could mean for you.
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Important Disclosures
The opinions expressed are as of 10/19/2023 and are subject to change.
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