Guggenheim's Walsh Sees Fed Cutting Once More This Year

Summary

Anne Walsh discusses the outlook for oil, equities, and fixed income at the Milken Institute. She expects oil to stay elevated near $100 for three months due to the Iran conflict, then decline to around $80. She is positive on US equities given a resilient economy and expects one Fed rate cut later this year. She views fixed income as a rate story and recommends extending duration when the 10-year yield reaches 4.5%.

• Oil base case: $100 for three months, then decline to ~$80 by year-end.
• Downside risk of extended Iran conflict not yet priced into markets.
• US equities viewed as resilient, having priced through the Iran conflict.
• Fixed income is more a rate story than a spread story outside of technology.
• Expects one Fed rate cut later this year but notes markets have priced that out.
• 10-year Treasury yield anchored between high 3% and high 4%; extend duration at 4.5%.
• Increased Treasury supply due to fiscal spending is lifting rates via supply-demand imbalance.
• New Fed chair likely to manage interest rates differently going forward.