May – 2018 Newsletter

The dramatic market volatility I discussed in last month’s newsletter continued throughout April as the yield on the 10-Year Treasury rate topped 3 percent for the first time since 2014. Fears of rising interest rates and inflation helped drive the volatility along with uncertainty about how aggressive the Federal Reserve might be in its efforts to “normalize” monetary policy under new chairman Jerome Powell. Though Powell took a “dovish” tone in an April speech in Chicago and expressed optimism that inflation will stabilize at around 2 percent, Wall Street remains nervous.1 That’s because some analysts believe there are several factors that could push inflation higher than the Fed’s target—and even Powell has admitted that if that happens, it could force the Fed to “raise short-term rates too quickly and cause a recession.”