In the chart below you can find what the Fed Fund futures discount for official rates from now to October 2026. If you knew for a fact these are going to be the rates, how would you position your portfolios to benefit from it? One investment idea that has become relatively crowded is to extend duration on the fixed Income side of portfolios. If official rates go to 2.95% by December next year and there is no recession, shouldn’t the yield curve slope become more pronounced? If that is the case, does it make sense to extend duration? How about credit? With very tight spreads now, are you compensated in yield to take new credit risks? And in terms of US equity positions, if current (high) valuations discount this Fed funds path, can they continue to achieve new highs? Investing these days is not easy, even with the cristal ball.
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