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Mahoney advises investors to focus on “growth companies” amid “one of the largest capital losses” in market history: “Be careful what you wish for. ” Remember, at the end of October we had this scary month because we were talking about keeping rates high for longer, that’s what they told us. Then about a week later they capitulated, following what we thought the bond markets were doing, and said, “Oh, about this increase for longer, probably through rate cuts. interest rate in 2024. “And then it was like a bidding war. . . Look, the last thing that is needed globally is six rate cuts because that comes with slower growth. I think in this environment Ricitos of Gold, believe it or not, because we have wonderful incomes; there are definitely headwinds, there are always things that you have to deal with. But be careful what you wish for. If you have three, four, five or six cuts of rates this year Through 2024, from where we are now, yeah, I wouldn’t need to see what the economic numbers are to precipitate this. ”
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(Bloomberg) — US Treasury Secretary Janet Yellen said it’s “unlikely” that market interest rates will return to levels that prevailed before the Covid-19 pandemic triggered a wave of inflation and higher yields.
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Asked why the White House projections released Monday showed particularly higher expectations for interest rates in the coming years compared to last year’s projections, Yellen said the new figures were in line with personal sector forecasts.
“I think it reflects the existing realities of the market and the forecasts that we’re seeing in the personal sector — that it’s unlikely that yields will ever be as low as they were before the pandemic,” Yellen told reporters Wednesday in the Elizabethtown Kentucky Array.
The yield on the 10-year U. S. Treasury note averaged 2. 39% in the decade to 2019, a low level by old standards. It rose above 5% last October after the Federal Reserve aggressively raised rates to fight inflation, and now sits just below 4. 2%.
A lot of debate has arisen among economists about whether, in the long run, rates would return to pre-pandemic levels or stabilize higher.
Read more: Rogoff says Biden and Trump are in favor of a debt ‘explosion’ and an end to low rates
The Treasury leader said that “it is vital that the assumptions included in the budget are tempered and consistent with the thinking of the broad diversity of forecasters. “
Yellen has hinted in recent weeks that her own views on the issue had shifted. In January 2023, she indicated it was more likely that low rates would return. But this January she said “the jury’s still out” on the question.
The White House’s new projections were part of President Joe Biden’s proposed $7. 3 trillion budget for fiscal year 2025. They now assume that average 3-month and 10-year U. S. Treasury yields will be considerably higher over the next 3 years than they had forecast for a year. behind.
Higher forecasts
The three-month rate, for example, will average 5.1% this year, up from the 3.8% projected last March, White House officials said. The 10-year yield projection rose to 4.4% from 3.6%.
The latter projection might have been even higher but for the intervention of Lael Brainard, director of the National Economic Council, according to people familiar with the matter prior to the release.
Higher rates on the U. S. developing debt burden particularly influence overall deficit and debt figures. Under current assumptions, the White House expects the U. S. to spend about $890 billion, or 3. 1% of its gross domestic product, on interest expense this year.
Yellen spoke while traveling to Kentucky to tout the Biden administration’s economic policy record, as part of its intensified efforts this year to serve the national public ahead of the 2024 election.
(Updates with context on Treasury yields in fourth paragraph. )
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