Key Private Bank Investment Brief

Key Takeaways:

Revisiting our core thesis – we are on the road back to the “Old Normal.”

The “New Normal” comprised the period from 2009 to 2021. In response to the Great Financial Crisis (GFC), the Federal Reserve (Fed) expanded their balance sheet and lowered interest rates to effectively zero. Growth and inflation were both modest during this period.

Interest rates were raised briefly between 2017 and 2019, but the COVID crisis saw the Fed quickly revert to the same playbook on an even larger scale. At the same time, a massive amount of federal spending (fiscal stimulus) was pumped into the system.

Beginning in March 2022, the Fed raised interest rates during its most recent rate-hiking cycle and, as such, rates turned positive in real terms (net of inflation) once inflation declined. The Fed has also begun reducing its balance sheet, but it is still seven times (7x) larger than it was pre-GFC.

The “Old Normal” is back – money has a cost, growth is faster (back to pre-GFC levels), and inflation has settled at a higher level. We believe this environment is likely to persist for some time.

Both inflation and real interest rates are not likely to revert to the 0.00% to 2.00% range in this environment.

A higher inflation, higher interest rate environment has implications for portfolio construction, and suggests that allocations to New Tools, such as alternatives and real assets, will continue to provide important diversification in the years ahead.

The Fed is likely to cut interest rates at this week’s December 18 meeting. After that, the Fed may pause.

One month ago, there was a 62% probability that the Fed would cut interest rates by 25 basis points at their December 18 meeting, according to the CME’s Fed Watch tool. Early Monday morning today (December 16), that probability was 96%.

In the meantime, the labor market has remained firm, economic growth has accelerated, and risk assets have appreciated. Inflation has ticked higher relative to the Fed’s previous projections.

For these reasons, the Fed’s Summary of Economic Projections (SEP) will be closely watched this week. Predictions of stronger growth or fewer projected rate cuts could push bond yields higher.

Both US consumers and corporations are feeling cheery, but uncertainty is increasing.

According to Evercore ISI (citing the University of Michigan’s sentiment survey), many US consumers are expecting household goods prices to increase, and may be making purchases in anticipation. Evercore ISI’s Christmas Tree Survey also shows that the 2024 holiday season is off to a strong start.

Consumers may be “pulling forward” demand due to uncertainty around tariffs.

Bottom Line:

Due to strong equity performance year-to-date (YTD), many portfolios have likely drifted overweight equities. Key Wealth believes in periodic rebalancing, and now is likely a good time to revisit risk exposures and rebalance portfolios where appropriate.

Remain Neutral to Risk and emphasize Quality investments. Employ small tactical tilts to areas that carry less-demanding valuations. Use New Tools, such as alternatives and real assets, where appropriate. Don’t let your politics undermine your financial goals.

Please find the replay to our recent 2025 Economic and Investment Outlook Call here: 12/4 Key Wealth's National Call Replay

Equity Takeaways:

Stocks rose in early Monday trading. The S&P 500 rose approximately 0.3%, to 6071, while small caps rose approximately 0.6%. International shares were mixed.

Overall trading volume is likely to decline after Wednesday’s Fed meeting on December 18. However, options expiration and S&P index rebalancing on Friday, December 20, may cause some elevated volatility on that day.

Despite some potential volatility mentioned above, the last two weeks of December tend to be a strong seasonal period. The S&P 500 is likely to drift higher into year end.

Corporate earnings growth continues to underpin the stock market. The trajectory of earnings in 2025 will hold the key to market performance. Consensus expectations call for significant earnings growth in 2025.

Key Wealth’s bull/bear projection scenarios are wider than last year’s. Our 2025 outlook envisions a wide range of potential policy outcomes, combined with elevated valuations – which could exacerbate volatility and inhibit future returns.

Our base case envisions a dip in earnings growth in the first half of 2025, followed by a strong second half. We believe volatility could increase in the first half of 2025 as a result. A potential risk to our 2025 outlook is that inflation runs hotter than expected.

Breadth is narrowing, a negative sign (caution flag). The headline S&P 500 index has been moving higher, while the cumulative advance-decline line for the NYSE has flattened. Broader participation would be a welcome signal.

Fixed-Income Takeaways:

Last week, longer rates rose faster than short-term rates (a “bear steepener”), as market participants reduced their expectations for rate cuts in 2025. Inflation remains sticky, which may force the Fed to cut rates slower than previously expected.

In early Monday trading, 2-year Treasuries were yielding 4.24%, 5-year Treasuries 4.24%, and 10-year Treasuries 4.39%.

As longer-term rates have risen relative to short-term rates, the Treasury curve has un-inverted. If the curve continues to normalize, we should see higher demand for longer-term bonds, all else equal.

A rate cut of 25 basis points is fully priced in for this Wednesday’s upcoming Fed meeting. Market participants will be focused on the Fed’s Summary of Economic Projections and the forward outlook for the economy and interest rates. The current Fed Funds rate is the range of 4.50% to 4.75%.

Credit spreads remain very narrow. That said, demand remains strong for high-quality corporate bonds. Investors continues to seek the higher all-in yields of corporates relative to Treasuries.

Key Takeaways:

Economic growth in the United States is accelerating, while growth in the European Union and Japan is decelerating. Underneath the surface, China has been struggling more than their headline GDP would indicate.

As growth in the US has improved, inflation has also remained higher in the US compared to the rest of the world. Both growth and inflation remain higher than pre-pandemic trends in the US.

The Atlanta Fed’s GDPNow estimate for Q4:2024 US real GDP has improved from approximately 2.5% to more than 3.0% in recent weeks. US vehicle sales increased in November, and Evercore ISI’s Christmas Tree survey showed that the holiday shopping season is off to a very strong start this year.

Conversely, growth remains sluggish outside the US. The Chinese yuan has been hovering near multi-year lows versus the US dollar, while Chinese bond yields have been plummeting amidst fears of slowing growth. Chinese 10-year bond yields recently slipped below 2.00% for the first time, causing the Chinese government to announce significant stimulus measures once again.

In short, the US dollar continues to be a safe haven currency, and the US stock market trades at a significant premium to the rest of the world. Fears of the US dollar losing its global reserve currency status are overblown. “King Dollar” will not be dethroned anytime soon.

The US labor market bounced back in November, but not quite as strongly as many expected.

A healthy 227,000 jobs were added to the workforce in November, in line with expectations. The October data was significantly negatively affected by hurricanes and strikes, which created much noise in the data.

The unemployment rate ticked higher, from 4.1% to 4.2%. Wages also rose, but conditions in the labor market are moderating, not overheating.

After this report, market participants became more convinced that the Federal Reserve (Fed) will cut interest rates at their upcoming December 18 meeting.

Private capital markets update (data from Pitchbook, Bloomberg and Morningstar):

Over the past year, private equity has underperformed public equity. Public equity tends to outperform coming out of a downturn (such as we saw in 2022). Over the long-term, private capital has outperformed public markets on a total return basis.

Private equity deal activity has picked up significantly in 2024 versus 2023. Increased deal activity should support returns going forward.

At $1.6 trillion, the private credit market is now larger than both the high yield and leveraged loan markets. The long-term loss rate for private debt is lower than the public high-yield bond market. Private credit also offers higher total return potential compared to public high-yield bonds.

Private capital can provide important diversification to portfolios but is not suitable for all clients.

Bottom Line:

Due to strong equity performance year-to-date (YTD), many portfolios have likely drifted overweight equities. Key Wealth believes in periodic rebalancing, and now is likely a good time to revisit risk exposures and rebalance portfolios where appropriate.

Remain Neutral to Risk and emphasize Quality investments. Employ small tactical tilts to areas that carry less-demanding valuations. Use New Tools, such as alternatives and real assets, where appropriate. Don’t let your politics undermine your financial goals.

Please find the replay to our recent 2025 outlook call here: 12/4 Key Wealth's National Call Replay

Equity Takeaways:

Stocks were mixed in early Monday trading. The S&P 500 fell approximately 0.1% to 6084, while small caps rose approximately 0.8%. International stocks were generally higher, led by a rally in Chinese shares.

The S&P 500 traded in a tight range last week with limited volatility. Going into year-end, the S&P 500 may be able to squeak towards 6200, but we don’t expect a ton of further upside into year-end.

Financials have taken over as market leadership. Deregulation is a theme of the incoming Trump administration, and financials should be a direct beneficiary.

Small and midcaps are another area of the market that could show strong earnings growth in 2025. Smaller companies are domestically focused and should also benefit from deregulation.

Americans are very bullish on the stock market. According to a recent Conference Board survey, approximately 51.4% of respondents expect higher stock prices in the next year, the highest level since Dec 2017 and one of the highest readings in the past 35 years. The average level for this indicator is 36% according to Bianco Research.

With sentiment elevated, the market may be due for some choppiness. Key Wealth’s bull/bear scenarios are wider than last year’s. Our 2025 outlook envisions a wide range of potential policy outcomes, combined with elevated valuations which could exacerbate volatility and inhibit future returns.

Fixed-Income Takeaways:

After declining slightly last week, Treasury yields drifted a few basis points higher in early Monday trading. Overall, 2-year Treasuries were yielding 4.13%, 5-year Treasuries 4.07% and 10-year Treasuries 4.19%.

Last week, expectations for a December rate cut increased. As of Monday morning, market participants were pricing an 87% chance that the Fed will cut rates by 25 basis points at their December 18 meeting. The current Fed Funds rate is the range of 4.50% to 4.75%.

Also scheduled for release during the December Fed meeting will be their updated Summary of Economic Projections (SEP). The Fed is expected to project approximately 0.75% of further rate cuts in 2025, which would project the Fed Funds rate to be the range of 3.50% to 3.75% at year-end 2025.

Consumer Price Index (CPI) inflation data will be released this Wednesday, December 11, with Producer Price Index (PPI) data coming the following day. These metrics will be the last major inflation data before the Fed’s next meeting.

Credit spreads remain very narrow. Investment-grade (IG) corporate bond spreads are at their lowest level in 20+ years. That said, all-in yields remain attractive due to high Treasury yields, and bonds are generating solid income for portfolios.

Key Takeaways:

Interest rates are dropping while inflation expectations are rising. Consumers continue to consume, and US economic growth forecasts are rising. But valuations are high, risk aversion is low, and political uncertainty is likely to persist.

In November 2023, economists were projecting 1.3% real GDP growth in 2024 for the United States, according to Bloomberg. The current estimate for full year 2024 US economic growth is 2.7%, well above initial expectations, driven by strong consumer spending.

Outside the US, 2024 GDP growth is tracking towards approximately 0.8% in Europe and will be essentially flat in Japan. Chinese growth is expected to be between 4.0% - 5.0% for calendar year 2024.

For 2025, US GDP is expected to grow approximately 2.0%, while Europe and Japan are projected for just north of 1.0% growth. Chinese growth is expected to remain between 4.0% - 5.0%. Estimates for US growth have increased slightly in recent months, indicating continued strength in the economy.

US inflation forecasts have risen slightly in recent months. The US Consumer Price Index (CPI) is expected to finish 2024 at 2.9% year-over-year (up from projections of 2.6% at the beginning of the year). Estimates for 2025 show US CPI is projected to fall to 2.3% year-over-year.

Earnings expectations and stock valuations are high. Risk aversion is low. Investors are bullish.

The US stock market has significantly outperformed global markets over the past 10+ years. Key Wealth remains overweight US equities, but we are cognizant that US stocks remain very expensive relative to the rest of the world.

The US stock market has benefitted from structural advantages relative to global indices. For instance, the S&P 500 is significantly overweight technology versus global benchmarks, and the tech sector has been a stellar performer over the past 10+ years.

As noted in prior comments, US stock markets remain expensive on various metrics. Valuation is generally not useful for market timing. That said, with signs of froth evident (a banana duct-taped to a wall recently sold for $6.2 million), it would not surprise us to see a pullback early in 2025.

The economic impact of Trump 2.0 is highly uncertain.

In a recent tweet on his Truth Social platform, President-Elect Trump made some strong comments regarding tariffs, the US dollar, and BRICS countries (Brazil, Russia, India, China, South Africa).

On a global basis, the US dollar remains the world’s reserve currency. According to the International Monetary Fund (IMF), the US dollar retains approximately a 60% share of all Foreign Exchange (FX) reserves – the IMF also notes that 90% of global foreign currency transactions are conducted in US dollars, as well as 75% of oil-related transactions.

While Trump’s comments are noteworthy, they are not a reason to panic. We acknowledge that the “de-dollarization” movement has legs; however, we do not see the dollar at risk of losing its reserve currency status any time soon, for despite our fiscal and political challenges, the US remains in an advantaged position due to deeply embedded economic, financial, and cultural reasons.

Bottom Line:

Due to strong equity performance year-to-date (YTD), many portfolios have likely drifted overweight equities. Key Wealth believes in periodic rebalancing, and now is likely a good time to revisit risk exposures and rebalance portfolios where appropriate.

Remain Neutral to Risk and emphasize Quality investments. Employ small tactical tilts to areas that carry less-demanding valuations. Use New Tools, such as alternatives and real assets, where appropriate. Don’t let your politics undermine your financial goals.

Equity Takeaways:

Stocks were mixed in early Monday trading. The S&P 500 rose approximately 0.2%, to 6042. The tech-heavy Nasdaq 100 rose approximately 0.9%, while small caps fell approximately 0.2%. International shares were mixed.

Over the past few weeks, S&P 500 forward earnings expectations have increased, providing enough support for a continued rally in the stock market.

Our base case for 2025 is that S&P 500 earnings continue to expand, and that the stock market price/earnings (P/E) multiple should remain relatively stable at approximately 22.0x. We expect a choppy, but ultimately positive market in 2025, with high single-digit returns as our base case. 

In 2025, S&P 500 returns are likely to be lower than the strong returns we’ve seen in 2023-2024. We prefer to focus on scenario analysis, rather than specific point estimates, and believe that portfolios should be stress-tested across a variety of different market environments.

Given that expectations for earnings growth are high, an unforeseen earnings recession could result in a sharp pullback in the stock market. We don’t see this scenario as a high probability event.

Fixed-Income Takeaways:

Treasury yields moved lower last week, reacting positively to President-Elect Trump’s choice for Treasury Secretary, Scott Bessent. In general, Treasury yields dropped approximately 20 basis points across the curve last week.

In early Monday trading, Treasury yields rose 5-8 basis points across the curve, reversing some of last week’s drop. Overall, 2-year Treasuries were yielding 4.23%, 5-year Treasuries 4.13%, and 10-year Treasuries 4.23%.

Minutes for the November Federal Reserve (Fed) meeting were released last week. Most Fed governors talked about a cautious or moderate pace of rate cuts going forward. Market participants are pricing approximately a 66% chance of a 25 basis-point rate cut (0.25%) at the upcoming December 18 Fed meeting. The current Fed Funds rate is the range of 4.50% to 4.75%.

The 3-month / 10-year Treasury curve is close to un-inverting (10-year Treasury yields are close to rising above 3-month Treasury yields). Once this curve un-inverts, we will have crossed another step towards normalization of financial conditions.

Credit spreads remain narrow but widened slightly last week. In terms of absolute yields, falling Treasury yields offset any spread widening last week. The investment-grade (IG) corporate bond index is currently yielding just over 5.0%.

Key Takeaways:

Trump 2.0 may ignite “animal spirits” via deregulation – excitement abounds. Will regulatory rollbacks unleash the animal spirits?

Yes: lower regulations are positive for mid/small-sized businesses, and government inefficiencies offer ample opportunities for reform. The new Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, may play a role.

Maybe/no: significant cuts in fiscal spending could slow growth in the short-term. Congressional approval will be required to cut spending for the biggest programs. The share of pure discretionary spending is relatively small as a percentage of the total federal budget (~ 25%), with defense the biggest piece of the discretionary pie.

In general, influencing economic growth through deregulation is difficult due to many layers of government.

Trump 2.0 tariffs and trade policy may stifle growth and reignite inflation – consternation abounds. Are tariffs bad for growth and bad for inflation?

Yes: tariffs are a tax, and taxes generally result in higher prices and slower spending.

Maybe: some countries may elect not to retaliate proportionately (or not at all). In addition, some U.S. companies may elect not to pass tariffs onto consumers (most will try).

Unknown: tariffs on what, by how much and for how long? Are tariffs just a negotiating tactic, or will they be for real?

Market-based measures of inflation expectations have risen in recent weeks, indicating that market participants are concerned about the effect of Trump 2.0 on inflation.

The U.S. economy remains resilient. 

The Atlanta Federal Reserve’s GDPNow estimate for Q4:2024 U.S. real GDP growth is 2.6%, a solid number in line with recent quarters.

Initial unemployment claims (a leading economic indicator) have remained stable between 200,000–260,000 per week for the past several years. Initial claims typically climb above 300,000 per week before a recession.

Continuing claims (a coincident economic indicator) are at a 3-year high at approximately 1.9 million. It is becoming harder to find a job once laid off.

Third quarter 2024 corporate earnings were solid, and expectations for future growth are high. Valuations are high and risk aversion is low.

In general, Q3:2024 earnings were slightly better than expectations. Overall valuations are high, and expectations for earnings growth are high going forward. Much optimism is priced into the markets.

According to FactSet, Q4:2024 earnings are forecasted to grow at more than 2x the rate of Q3:2024 – if achieved, this growth rate would be the fastest since Q4:2021. Financials are the sector with the highest projected earnings growth in Q4:2024.

Bottom Line:

Due to strong equity performance year-to-date (YTD), many portfolios have likely drifted overweight equities. Key Wealth believes in periodic rebalancing, and now is likely a good time to revisit risk exposures and rebalance portfolios where appropriate.

Remain Neutral to Risk and emphasize Quality investments. Employ small tactical tilts to areas that carry less-demanding valuations. Use New Tools, such as alternatives and real assets, where appropriate. Don’t let your politics undermine your financial goals.

Equity Takeaways:

Stocks rose in early Monday trading. The S&P 500 rose approximately 0.6%, to 6003, while small caps rose approximately 2.0%. International shares were generally higher.

The S&P 500 is coiling near 6000 and appears set to run higher through year-end. We are entering a very strong seasonal period (post-Thanksgiving through end of year).

Forward earnings estimates have moved to new highs in the past 7–10 days. After the calendar flips to 2025, we expect some tougher comparisons; but until the end of the year, it’s clear sailing on the earnings front.

Another tailwind to the markets – stock buybacks are in full swing. The end of the year is a very active time for corporate stock buyback programs. These programs are price-insensitive and will generally chase the market higher regardless of valuation.

If we enter a falling interest rate environment in 2025, investors should consider increasing exposure to dividend-paying stocks. Dividend-paying stocks tend to perform well on a relative basis when interest rates are falling. Valuations are also lower in this sector compared to the S&P 500.

Fixed-Income Takeaways:

Last week, front-end Treasury yields rose while long-end yields were relatively stable, flattening the yield curve. Market expectations have shifted. Fewer rate cuts are expected in the future, which has put upward pressure on yields.

In Monday morning trading, yields were falling across the curve. Trump’s pick for Treasury secretary, Scott Bessent, was received favorably by market participants.

In early Monday trading, 2-year Treasuries were yielding 4.31%, 5-year Treasuries were yielding 4.21%, and 10-year Treasuries were yielding 4.30%. These levels were 7-10 basis points lower across the curve compared to Friday’s close.

Even as Treasury yields have risen in recent weeks, overall bond volatility has fallen post-election. Some complacency seems to have creeped into the bond markets, especially around potential geopolitical risk and the possible effect of tariffs and deregulation on inflation and bond yields.

Credit spreads remain very narrow relative to historic levels. Investment-grade (IG) spreads drifted slightly wider last week, while high-yield spreads moved slightly tighter. Pockets of value remain in areas like mortgage-backed securities, but in general, credit products are expensive.

Yields on floating-rate securities have begun to fall and will continue to drop as the Federal Reserve cuts interest rates. That said, we have not yet begun to see outflows from these securities, and floating-rate spreads remain very tight.

High-yield municipals are another bond market sub-sector that have seen significant inflows all year and remain quite expensive relative to Treasuries.

Key Takeaways:

President-Elect Trump will inherit a different economic situation than he did in 2016.

In the two weeks after the elections, markets have been volatile, with sentiment swinging between euphoria and skepticism. In our view, while there are some reasons to think that the strong equity market that prevailed for much of the President-Elect’s first term may repeat, it is noteworthy that President-Elect Trump will inherit a different economic situation than he did in 2016.

Interest rates and inflation are both significantly higher in 2024 versus 2016, and the stock market is significantly more expensive. The current forward price/earnings (P/E) ratio for the S&P 500 is approximately 22.2x, rather than 16.5x in October 2016. The federal deficit as a percentage of U.S. GDP is 6.1%, versus 3.1% in 2016.

Trump version 2.0 is potentially inflationary (a full extension of his tax cuts would add significantly to the deficit), and is also likely positive for economic growth, although much uncertainty surrounds his policy proposals.

Consumer spending remains resilient, and inflation remains sticky.

October’s headline retail sales were better than expected, and revisions to past months were to the upside. Consumer spending drove much of the growth in the economy in the third quarter.

Inflation, as measured by the year-over-year change in the Consumer Price Index (CPI), had been decelerating for most of 2024. In recent months, the CPI has leveled off around 2.5% (October 2.58%). The core CPI, which strips out food and energy prices, has leveled off between 3.2% and 3.3% since June. Further declines have not materialized as quickly as some market participants have expected. The Federal Reserve’s long-term inflation target is 2.0% year-over-year.

Looking solely at the level of prices versus the level of wages, Services inflation excluding shelter has outpaced wages since early 2021. This dynamic is likely one reason many Americans are in a sour mood despite strong headline economic growth.

Commercial Real Estate (CRE) prices are trying to bottom.

The NCREIF Property Index turned positive in Q3:2024, eking out a 0.8% gain after declining for seven consecutive quarters. The weak spot remains office properties, where prices continued to decline in the quarter. Hotels remain the strongest sub-sector, driven by continued economic growth.

Aside from office, CRE fundamentals remain strong. The construction pipeline has slowed, which should reduce supply to be more in line with demand growth. In addition, easing inflationary pressures and declining interest rates should create a more favorable credit environment for real estate.

Bottom Line:

Due to strong equity performance year-to-date (YTD), many portfolios have likely drifted overweight equities. Key Wealth believes in periodic rebalancing, and now is likely a good time to revisit risk exposures and rebalance portfolios where appropriate.

Remain Neutral to Risk and emphasize Quality investments. Employ small tactical tilts to areas that carry less-demanding valuations. Use New Tools, such as alternatives and real assets, where appropriate. Don’t let your politics undermine your financial goals.

Equity Takeaways:

After closing above 6000 for the first-time, the S&P 500 took a breather late last week, pulling back off an all-time high. Stocks were essentially flat in early Monday trading, with the S&P 500 down 2 points to 5,868. Small caps rose approximately 0.3%. International shares were generally higher.

Valuations remain expensive. Earnings for Q3:2024 have been just okay and estimates for 2025 earnings growth are aggressive. The stock market likely needs a period of sideways movement and/or “backing & filling” to digest the strong gains year-to-date.

Earnings estimates for Q4:2024 have been revised slightly lower even as the stock market has powered higher. Expectations for strong earnings growth in 2025 are embedded in current market prices, implying optimism.

A very large semiconductor company reports earnings this week. In general, the performance of the semiconductor sector relative to the S&P 500 has been weakening. Any further break lower in semiconductors would suggest that the market requires new leadership.

Cyclical sectors of the market, such as financials and industrials, are showing relative strength, but they are smaller on a relative basis compared to semiconductors.

Gold prices have declined sharply in recent weeks and are approaching an important support level (bottom of an upward-trending channel). A bounce near current levels would imply that the current uptrend remains intact.

During the first Trump administration, energy exploration and production (E&P) companies underperformed the S&P 500 due to oil and gas oversupply and COVID-19 regulations. Refineries and midstream (pipeline/storage) companies outperformed due to a beneficial regulatory environment.

During the Biden administration, contrary to expectations, energy E&P companies outperformed the S&P 500 by a large margin, due to capital discipline and better production restraint. Midstream companies underperformed due to increased regulation.

During the upcoming Trump administration, we are bullish on midstream energy assets, which should see an increasingly favorable regulatory environment. We are slightly positive on E&P companies, which should also see less regulation, but are at risk of increased supply keeping a lid on oil and gas prices.

Fixed-Income Takeaways:

Bond yields moved higher last week as several Federal Reserve (Fed) governors, including Chairman Jerome Powell, pointed to a more cautious approach to future rate cuts. Expectations for fewer future rate cuts pushed yields higher.

Currently, market participants are pricing approximately a 55% probability of a 25 basis-point rate cut (0.25%) at the Fed’s upcoming December meeting. Just several weeks ago, a December rate cut was fully priced in. The current Fed Funds rate is the range of 4.50% to 4.75%.

In early Monday trading, 2-year Treasuries were yielding 4.31%, 5-year Treasuries 4.32%, and 10-year Treasuries 4.46%. From a trending perspective, 10-year Treasury yields are at their highest levels since July.

Credit spreads remain very tight. Investment-grade (IG) corporate bonds continue to receive strong inflows. Despite narrow spreads, all-in corporate bond yields remain attractive to many investors.