Why Are US Interest Rates Falling?

| July 08, 2018
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A) They are predicting a slowdown in the US economy in the back half of 2018.

OR

B) S&P 500 companies are contributing to pension plans this year at a pace expected to nearly match 2017’s level, which at $63 billion was the most since 2003, according to Goldman Sachs Asset Management. Last year’s contributions were spurred in part by companies anticipating changes in the U.S. tax-code overhaul. Firms that contribute through mid-September of this year can receive deductions based on the old 35% corporate tax rate, rather than the new 21% rate. A company that contributes $1 million to an underfunded pension plan could have $350,000 in tax savings before the deadline, but would have savings of just $210,000 after September.

Based on our GIPs (Economic Growth and Inflation) data, base rates and trends, I say A. However, from a technical standpoint the near-term rally based on the tax-laws HAS contributed to lower market yields.

I will leave you with this thought. While the data is predicting a slowdown, not a recession, this trend started BEFORE the tariffs were put into place. However, the trade war will be sited by the media as the reason for the slowdown when it occurs.

 

Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O

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