While the global pandemic has faded into the market’s rearview mirror, the impact of a tidal wave of central bank liquidity and government stimulus remains a legacy. Bond futures spiked higher in a flight to quality in March 2020. After running out of upside steam, the bonds have made lower highs and lower lows for over two years.
Inflation rose to a four-decade high when the U.S. Fed reversed course and tightened credit. The Fed waited too long to address rising prices, but the shift to a hawkish monetary approach pushed the short-term Fed Funds Rate 5% higher since March 2022. The long bond futures and iShares 20+ Year Treasury Bond ETF product (TLT) remain in bearish trends in late May 2023, but the path of least resistance could be running out of downside steam.
