Similar to the one-year lag in inflation taking hold as a result of too much stimulus, we expect the U.S. Federal Reserve (the Fed) to continue their tightening policy until well after the point that additional tightening is necessary. The most obvious reason to expect economic turmoil is that the full effects of the substantial monetary tightening over 2022 have yet to be realized.
In our opinion, the Fed has not sufficiently recognized that it has already won the inflation battle. As a result, we think the Fed will continue increasing interest rates and increasing economic risks.
Under this scenario, we have adjusted our Strategies to potentially provide some more protection from the fallout of an overly tight monetary policy.
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