While global economies continue to rebound from the pandemic’s effects, the pace of the recovery is uneven. The U.S. is leading the charge, while several European countries continue to struggle with lockdowns and restrictions. This varied backdrop highlights the importance of active, experienced fixed-income portfolio management.
Economy. Improving data in the U.S., where pent-up consumer demand, along with central bank support and record fiscal aid, are fueling robust economic growth. Pandemic-related restrictions are still hampering the eurozone and U.K. GDP rates, which continued to contract.
Rates. Longer-maturity U.S. rates headed lower in the second quarter, but we expect a gradual reversal and a steeper curve as technical factors unwind. Meanwhile, U.K. and European yields remain sharply lower than U.S. yields amid lingering lockdowns and weaker economic data.
Inflation. Inflation continues to climb, especially in the U.S., where headline inflation sits at a 13-year high. We expect inflation to moderate as base effects and supply-chain issues ease. But we expect global inflation to remain higher than pre-pandemic levels.