Interestingly enough, recently, many reputable economists have revised their negative forecasts for the US economy. Not long ago, they literally predicted its inevitable crash. Yet, now, they are making bullish calls on its fast and steady recovery. When leading economists no longer doubt the prospects of the US economy, it is no surprise that others are echoing their views.
Jim Caron, the Portfolio Manager and the Head of Global Macro Strategies for the Global Fixed Income Team at Morgan Stanley, strongly believes that the US economy is going to assert strength even more in the near future. He argues that the main catalyst for its growth is going to be a long-term rally of the 10-year US Treasury yield which usually guides other interest rates in the US. Once yields on the 10-year Treasury bonds edge higher, so do the interest rates on other types of debt instruments. According to statistics, in mid-March, the 10-year US Treasury yield totaled 1.7%, logging the highest figure for the last year. The 30-year Treasury yield also increased by 2.4%. Experts believe that these are good omens for the US economy.
They also note the fact that the bond market appreciated despite the lack of any drivers and a rather uncertain market situation. Additionally, the Fed has assured more than once that it is not going to hike the interest rate or abandon its quantitative easing (QE) program in the foreseeable future. QE involves the purchases of government, corporate, and mortgage bonds from banks.
“Confidence is coming in as states are reopening, people are getting vaccinated and the infection rates are going down. Certainly, all these extra money sloshing around from the relief plan and payroll protection programs is going to be helpful. That is going to really help with confidence and consumption — consumption being 70% of GDP,” Jim Caron said.
