[Intro screen with title of video “2 Minutes on the Markets” is displayed]
This is your two minutes on the markets with takeaways from my mid-year outlook.
[Icons representing the Federal Reserve building and interest rates being on pause are displayed]
We expect the Federal Reserve to be on an extended pause through year end, but acknowledge that the risks of a rate hike have risen. High inflation and the recent strength in the labor market would support the case for a hike, but there's a lot of uncertainty around that outlook.
That doesn't mean the next move will necessarily be a hike, however, and we think the Fed will likely take a patient approach given all the uncertainty in the Middle East.
[High/low chart showing Treasury yields and oil prices from December 2025 to May 2026]
We expect the 10-year Treasury yield to hold near its recent 4 % to 4.5 % range, and we see more upside risks than downside risks. Sticky inflation, budget concerns, and the trend in global bond yields could all pull the 10-year Treasury yield modestly higher. For the 10-year yield to move meaningfully lower, we'd likely need to see economic growth slow and recession risk rise, and that's not our base case.
[Dotted line is displayed moving from above the text “Below-benchmark Average Duration” to below them.]
With that outlook, we suggest investors favor a below-benchmark average duration. Now is not the time to aggressively be considering too many long-duration investments given the risk of modestly higher long-term yields. That doesn't mean investors should only focus on very short-term investments either, as there's an opportunity cost there.
[High/low chart showing Treasury yields across the yield curve as of 2/27/2026 and 5/31/2026]
With a positively sloped yield curve, investors can earn modestly higher yields with short- and intermediate-term maturities compared to very short-term investments like Treasury bills.
With a resilient economy and strong corporate earnings lately, investors can consider taking a little risk today, depending on risk tolerance, of course. We encourage investors to focus on the yields that they offer, rather than potential price appreciation, and be prepared for occasional bouts of volatility. That's your two minutes on the market. Thanks for listening.
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