Given the Middle East war, where should the Fed's emphasis lie between labor market softness and energy-driven inflation concerns?
Anna Edwards
Deborah Cunningham
Both labor and inflation are top concerns now. The dual mandate must be emphasized on both sides, with the here-and-now from inflation being the top concern from Chair Powell.
Markets price one cut by end of 2026. If they cut less in 2026, does that mean further/deeper cuts in 2027?
Anna Edwards
Deborah Cunningham
We came into 2026 expecting one cut, with risk of two. Now expectation is one cut, but risk is zero, not two. Further cuts in 2027 are likely, but terminal rate still north of 3%.
In a higher-for-longer environment, how competitive are money market funds?
Tom Mackenzie
Deborah Cunningham
Cash has flowed positively since 2022. With rates north of 3% and touching 4%, people feel comfortable getting adequate return for a low-risk product. Micro/ultra-short products may see yields stay north of 4%, touching 5%.
What's the link between risk aversion from the war and money market flows?
Anna Edwards
Deborah Cunningham
Sideline cash from other markets is coming into money markets because investors aren't taking a huge hit on return and they want safety/security to reduce risk.