3 Keys to the 2021 Second Half: Global Rates & Currencies | Lord Abbett
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Economic Insights

Lord Abbett Portfolio Manager Leah Traub looks at three factors that could influence global interest rates and currencies in the second half of 2021. 


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[LOWER THIRD: Leah Traub, Ph.D., Partner & Portfolio Manager] Hi, this is Leah Traub, partner and portfolio manager in taxable fixed income, here to talk about the three key things to watch out for in the second half as it relates to global interest rates and currencies.

[LOWER THIRD: Key #1: Watching the U.S. Federal Reserve (Fed).] The first: monetary policy. What is the Federal Reserve going to do in terms of tapering its quantitative easing purchases? [LOWER THIRD: Under quantitative easing, a central bank buys government bonds or other financial assets in order to add money directly into the economy.] The market is expecting a tapering announcement to come in the fourth quarter and for tapering to last for the next year [to] year-and-a-half. You know that will depend on the employment picture significantly improving, as well as signs that inflation is maybe becoming a little bit more sustained. So what will happen with that timeline--will it be accelerated?

[LOWER THIRD: Key #2: U.S. fiscal policy developments.] On the second point, fiscal policy: Will the extra stimulus that we saw this year, particularly in terms of the extended unemployment benefits, roll off as intended, in September? What will happen with the infrastructure bill that's currently being negotiated in Congress? Both of those will determine whether and how much fiscal drag, we will have going into 2022. That, combined with what the Fed’s going to do, will tell us how much of this extra stimulus that we've had over the last year and a half or so will continue into next year.

[LOWER THIRD: Key #3: The pace of global growth.] And then finally, global growth. Will the rest of the world be able to catch up to the gangbusters U.S. growth pace that we're seeing this year? With stimulus [reducing] in the U.S., and as the economy has reopened, we do expect the U.S. economy will slow down a bit going into next year, so we need the rest of the developed world and especially the emerging world to really pick up the baton to carry global growth and trade further into next year.

All these three [factors] will really determine what happens with U.S. interest rates, relative to interest rates in the rest of the world, and then and then what the impact will be on the U.S. dollar.


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Thank you for listening


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