This episode explores the impact of tariffs on interest rates and credit markets, featuring an interview with Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management. Against the backdrop of the Federal Reserve's rate cuts, the discussion notes that 10-year Treasury yields remained unchanged, a phenomenon explained by the interplay of inflation and growth expectations, which have shifted significantly since October. More significantly, the imposition of tariffs has created uncertainty, impacting both inflation and growth, thereby complicating the Fed's policy decisions. As the discussion pivoted to credit markets, Rosner highlights that credit spreads widened initially but have since narrowed, suggesting that a recession isn't fully priced in. For instance, investment-grade spreads are currently at 100, far from recessionary levels of 175-200. Rosner concludes that while a recession remains a possibility, the current credit spread levels are relatively fair. The conversation concludes with Rosner's investment outlook, favoring Treasuries due to their continued safe-haven status and highlighting the positive total return of bonds this year, contrasting with negative returns in equities. This suggests emerging industry patterns reflecting a shift in investor sentiment towards bonds amidst economic uncertainty.
