The spread between the three-month London Interbank Offering Rate (LIBOR) and the Overnight Indexed Swap (OIS) has widened to its highest level since 2008. This increase may be grabbing headlines, but in our view it is not portending anything ominous at this point. The three-month LIBOR is a good proxy for interbank lending, as it tracks the rate at which banks are willing to lend money to each other. It stands at 2.29% (as of March 23, 2018). OIS uses an overnight index rate, such as the overnight fed funds rate, making it a good proxy for central bank rates. It currently stands at 1.70%. Thus the spread between the two can be seen as an ind

Beige Book Suggests Continued Moderate Economic Growth

The Federal Reserve (Fed) was in the news last week, as markets digested the March 20–21 Federal Open Market Committee (FOMC) meeting statement. The outcomes of the meeting were broadly in line with market expectations, with the Fed hiking interest rates by 0.25%, and upgrading its economic forecasts as the impact of tax reform was included for the first time. The law had not yet passed when the Fed released its previous forecasts on December 13, 2017. The Fed’s forecast of the future path of interest rates (commonly known as dot plots) showed an expectation of three rate h

The NCAA Men’s Tournament Final Four is set. Kansas, Loyola, Michigan, and Villanova are headed to San Antonio, Texas to determine this year’s college basketball national champion. In that spirit, following our “Sweet 16” commentary last week, this week we share our “Final Four Factors” for the stock market in 2018: economic growth, earnings, trade policy, and the midterm elections.

While we expect a hard-fought battle between these factors and with it, more market volatility, we still see the potential for solid gains for stocks this year and maintain our year-end fair value S&P 500 Index

With shorter-maturity yields increasing as of late, the front end of the yield curve (shorter-maturity fixed income) may be offering an enticing trade-off between risk and reward, and a potential place for investors to play defense. Sector selection and yield curve positioning decisions are difficult in dynamic rising rate environments, but with scenario analysis, we can begin to determine how portfolios may perform in this challenging market.

The Bloomberg Barclays U.S. Aggregate Bond Index (“the Aggregate”), the most widely used high-quality bond benchmark, serves as a good example of the price weakness that has sur