News –——

San Franciso, California,

March 22 2021



Mirage or Reality

Since the beginning of 2021, the market’s focus has shifted from when the recovery will start to how fast the economy will recover.

Too fast of a recovery may imply inflationary pressures and test the Federal Reserve’s resolve to keep rates low. We believe that the Fed will face trial by fire in not one, but two distinct waves of inflationary pressures that will manifest over the course of 2021. The recent price action in Treasury bonds shows how the market has started to “price in” the recovery of inflation, which will test the Fed even earlier than we expected.

Over the last two weeks, Treasury bond yields demonstrated a notable bout of volatility, rising 20 basis points to end this week at 1.41%. When we write about volatility, it’s usually in the context of more volatile assets like equities, but this past week the bond market took a big step in digesting the potential economic reflation ahead. Put plainly, bond yields are experiencing some growing pains as we navigate closer to a “post pandemic” world. The rise in the 10-year Treasury yield brings it to a level nearly double what it was just 6 months ago, as seen in the yield curve chart.

US Treasury Yield Curve

Inflation expectations are rising, pushing yields higher and steepening the Treasury yield curve to its highest level in 4 years.

Next Few Months:
We think April and May 2021 will show increased inflation due to comparisons with the prior year (April and May 2020) during the depth of the initial COVID-19 shutdown and therefore could be as high as 3%. We think the Federal Reserve is likely to ‘look through’ this data and remain committed to ultra-low rates.

Next Few Quarters:
A second test of the Fed’s resolve will likely take place once the economy returns to normalcy. With “excess savings” of nearly $2T representing substantial pent-up demand and the supply side of the economy having shrunk, 2H 2021 could see more sustained inflationary pressures.

Our View
We think the Federal Reserve is likely to remain supportive of ultra-low rates even during this second wave of inflationary pressures, thereby supporting equities.

This presentation has been prepared by Jordan Park Group LLC (“Jordan Park”) for informational purposes only. The information contained herein should not be construed as investment, legal or tax advice. It is important to note that the services of Jordan Park are not legal services and that the protection of the client-lawyer relationship, including attorney-client privilege, do not apply to the relationship between Jordan Park and its clients. Past performance may not be indicative of future results. All investments involve potential risks, including loss of principal. Jordan Park’s Form ADV, which includes a discussion of investment strategies and associated risks, conflicts of interest and fees, among other matters, is available at the SEC’s website or upon request to Jordan Park. Registration with the SEC does not imply a certain level of skill or training. Additional information regarding your custodian is available on their website.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain cases has not been updated through the date of the distribution of this presentation. While such sources are believed to be reliable for the purposes used herein, Jordan Park does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Jordan Park considers to be reasonable.

For more information

contact Jordan Park