Rates in 2019: Here's Your Roadmap to the Future
Our 2019 Interest Rate Outlook
As we embark upon a new year, it’s worth taking a quick look backwards to best assess the future. 2018 was one of the rockiest years for markets since the financial crises, rattling participants in equity, fixed income, currency and commodity markets equally. Borrowers suffered through four Fed rate hikes, an unpredictable US Presidential administration, a trade war between the world’s two largest trading partners, and the resultant volatility in stock prices, interest rates and the price of oil. On top of it all, news that the world’s favorite index - LIBOR - is set to be replaced rattled lenders and borrowers alike.
2018 began with hopes of strong, coordinated global growth. 2019 does not, as economic expansion in the world’s advanced economies is set to slow. America’s economy will slow with them as the stimulative effects of the tax cuts and fiscal spending fade and job creation peaks. Key unknowns for the year ahead are the pace and degree of Fed rate hikes and their ensuing impact on emerging markets, the intensity of the negative fallout for U.S. businesses from the U.S.-China trade war, and the effects that tighter financial conditions - and politics - have on the US, Europe and China.
In our 2019 Interest Rate Outlook, we review the primary drivers for interest rates for the year ahead, then outline several possible scenarios for the year, each with a unique set of short and long term interest rate forecasts.
Regardless of the path, we’ll see a continuation of political challenges, both domestic and abroad, lower but respectable economic growth, rising wages, creeping inflation and anchored long-term interest rates.
We wish you a prosperous 2019.
The Derivative Logic Team