While a soft landing for the US economy remains the CIO’s base-case scenario, Hou is expecting to see substantial volatility for risk assets as the three major turning points meet: rising disinflation and peak Fed rates, a negative yield gap on equity earnings and the US 10-year treasuries, and the Fed pause amid a dis-inversion of the yield curve.
The US Federal Reserve’s (Fed) rate hike is nearing its peak, predicts DBS’s chief investment officer (CIO), Hou Wey Fook, in the bank’s CIO insights for 1Q2024. This follows the Fed’s swift series of rate hikes, totalling 525 basis points over 16 months, marking one of the fastest increases in history.
As US rates approach their peak, concerns arise with disinflation setting in and the Fed pausing its monetary tightening. Hou highlights the risks of potential overtightening, compounded by the US’s severe indebtedness and precarious fiscal situation.
