In a discussion on July 1, 2019, Jeffrey Sherman, deputy chief investment officer of DoubleLine, and portfolio managers Jeff Mayberry and Sam Lau conduct their mid-year review of the financial markets, including the return of “central bankers back in charge,” Treasuries seemingly priced for recession amid U.S. stocks at all-time highs and concerning signs in purchasing managers and sentiment indicators. “It kind of feels like we’re being driven by the global forces today,” Sherman says. “We look at the U.S. economic data, and … the numbers are still pretty positive…. Our recession indicators, there’s a couple of them yellow, there’s a couple that are red, that say recession, but all of the ones that are red are actually yield curve-related, which can be fixed by the Fed. Perhaps that’s what some of the markets are thinking.” Sherman also perceives a turning point in the form of a “drastic” change in inflation expectations at the Federal Open Markets Committee meeting on March 20. Sherman asks “are we in this self-fulfilling idea that prices will not accelerate to the upside.”
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