Macro Observations

For the better part of the past four months, long-term Treasury yields have been moving steadily higher. A resiliently strong U.S. economy, a progressively more hawkish Fed and the emergence of a new potential inflation threat have all worked together to push the 10-year yield more than 100 basis points higher in pretty short order. But what if there’s another catalyst at play?

I’ve gotten a number of questions lately regarding tariffs, how they’ll impact the global economy and what that means for recession and inflation risk going forward. I think it’s time to review a few scenarios. What about the longer-term ramifications? We’ve often heard the saying that the cure for inflation is inflation. Is that the case with tariffs as well?

So what does the Fed’s surprisingly hawkish and the BoJ’s surprisingly dovish stances post-meeting mean for the markets and the economy as we head into 2025? With the Fed only looking like it will make minimal rate cuts next year, the path appears to be higher for the dollar. In a maturing cycle, that probably puts the odds in favor of mega-cap growth and tech again, although the upside might not be as high as investors are hoping for.