Why a Fed Pivot Could Trigger Volatility

Michael Zezas, Global Head of Fixed Income Research and Public Policy Strategy, discusses the implications of a subtle shift in the Federal Reserve's reaction function for year-end market performance. He highlights the Fed's increased tolerance for inflation and its potential impact on U.S. government bonds, corporate bonds, and the stock market. While Zezas anticipates mostly positive returns across fixed income and equities, he cautions that increased volatility is likely due to the Fed's altered approach. He notes that a potential sell-off in long-term bonds could negatively affect stock market valuations, particularly for growth stocks. The overall outlook remains constructive, but with a caveat of less smooth sailing compared to previous months.