Columbia Threadneedle has pointed out that the "confusing" way in which the Federal Reserve of the United States (Fed, for its acronym in English) is communicating has reactivated investors' appetite for bonds.
"The confusing communication from the Fed is creating renewed interest in fixed income, which is very different from any other time in recent history," pointed out the fixed income portfolio manager for Columbia Threadneedle clients, Balaji Venkataraman, in a teleconference.
As the manager has explained, the U.S. central bank has shifted from a more "conservative" stance at the Jackson Hole symposium, where it emphasized that its priority was to contain inflation, to a more accommodative approach, in no hurry to further tighten monetary policy.
"The risk is that the Fed becomes less credible," warned the fixed income portfolio manager of Columbia Threadneedle, Ed Al-Hussainy, regarding a scenario in which inflation rises and the central bank must adjust rates upward, as happened in 2022.
Based on this diagnosis, the firm anticipates an increase in interest rates by the Fed in the last quarter of 2026.
"Optimism" ahead of the midterm elections in the U.S.
In relation to the midterm elections in the United States ("midterms"), scheduled for January 3, Venkataraman has highlighted the "great optimism" surrounding the electoral event.
"Historically, after the 'midterm' elections, risk assets have performed very well because a more disorganized and conflicted government is actually something positive, as there are no legislative, fiscal, or spending surprises," he stated.
Columbia Threadneedle's forecast is that the Democratic Party will increase its control over Congress, in line with the prevailing consensus in the markets. From a legislative perspective, "it seems increasingly likely that measures related to executive action will be the easiest path over the next two years," Venkataraman explains.
In addition, the manager has emphasized that a good part of the initiatives that the Trump Administration intends to push forward are linked to deregulation, especially in the financial sector.