According to Komal Sri-Kumar, president of Sri-Kumar Global Strategies, the US is heading towards a recession and the federal funds rate is likely to move lower sooner.
Sri-Kumar points to three factors that support his prediction.
Firstly, the entire yield curve has shifted downward, which means that regardless of where you are on the yield curve in terms of investment, you’re likely to get a capital gain if you wait long enough.
Secondly, the recent developments on the interest rate policy and the mismanagement of monetary expansion during 2021-2022 will likely cause a recession.
Finally, there is a banking crisis that is disinflationary, which will bring yields down even further.
Sri-Kumar expects more gains in the fixed income market, but small and medium-sized companies relying on bank loans may be disappointed.
