Barbara Reinhard, CFA, Head of Asset Allocation
Broad earnings strength in the United States, Europe and emerging markets bolsters our continuing bias toward risk assets. We believe U.S. Treasury bonds are not likely to produce much beyond their coupon rate for this year.
Despite signs of economic softening the Federal Reserve still intends to normalize policy through interest rate hikes, ending reinvestment and reducing its portfolio. Though bond investors might expect increased market supply to result in higher yields, we believe that strong demand — and Treasury issuance coordinated with Fed policy — will mitigate a significant rate move.