The US giant asset manager who oversees more than $ 20 trillion anticipates sustainable price pressure due to the immigration and trade policy of President Donald Trump, a scenario that is likely to continue to threaten the bond market this year.
Vanguard, the second largest asset manager in the world, who manages more than $ 10 trillion, said in a report on the first quarter fixed income prospects seen by Reuters that they expect “the progress of inflation to stop,” with the core steps of jammed price pressure in over federal federal target 2% reserves and above 2.5% for most of 2025.
The trade and immigration policies implemented by the government of the Republic of Trump can complicate further images, he said in a report written by his active fixed income team, led by Sara Devereux, Head of Global Fixed Revenue Groups.
“While the view of our basic case is positive, we emphasize that the uncertainty created by the government that entered created various potential results for growth, inflation, and monetary policy, both domestically and abroad,” he said.
Investors are waiting for more announcements from new administration regarding policies on tariffs, immigration and tax cuts. Trump, who began his second term of office in the White House on Monday, swear this week to reach the European Union at the tariff and say his government is discussing the 10% sentence of imported Chinese imports – lower than 60% which he promised for 2024 of his 2024 presidents the campaign .
He also said he thought of imposing a 25% tariff on imports from Canada and Mexico on February 1.
The impact of Trump’s policy on inflation and growth will depend on their scope and sorting, said Libby Cantrill, Head of Pimco Public Policy, and Allison Boxer, an economist in an investment company that focuses on bonds, who manages $ 2 trillion of assets.
But in the scenario where the tariff increases and the budget deficit is widened because of the expected tax deduction, growth can slow down this year while inflation increases. “In our initial view, we hope that the higher core inflation is around 20 to 40 basis points in the US in 2025,” they wrote in a note on Thursday. “Negative growth effect is likely to have the same size.”
Vanguard also warns about the impact of the rates that may be negative, depending on the size and distribution. “Geopolitical retaliation can increase business uncertainty and further limit growth,” he added.
Increased yield yield
The results of the US government bonds, which have risen when prices have declined, have jumped over the past few months, some to anticipate pro-growth policies under Trump’s government which can also turn on price pressures, complicate Fed’s efforts to reduce inflation to its target.
The 10 -year benchmark results declined slightly after Trump’s inauguration on Monday, because the tariff talks were less aggressive than the feared. Results of returns above 4.65%, down from more than one year highest 4.8% last week but still around 100 basis points were higher than September, when Fed began to facilitate interest rates.
Blackrock, the largest asset manager in the world with an asset of $ 11.6 trillion, hopes that the results will continue to increase due to a higher combination of inflation and increasing government debt rates. This is a bearish on long -term government bonds, hoping that the 10 -year results will continue to increase above 5%.
“We have never seen a combination of sticky inflation today, a higher level of policy and a high level of debt and increased,” the Blackrock Institute, the arm manager’s research arm, said in a record this week.
“This combination represents a fragile balance supporting investor demand for long -term bonds,” he said.
Source: Reuters
