The Federal Reserve expects the economy to continue its soft landing

Maulik Bhansali, senior portfolio manager at Allspring Global Investments, said it was not the 25 basis point rate cut that had a bigger impact on credit markets, but rather the Summary of Economic Outlook. The data suggest two more rate cuts are likely this year, along with a slight lift in GDP growth expectations. Despite heightened labour market concerns, the unemployment rate is expected to decline slightly. All of these factors combine to suggest that the economy may continue to have a soft landing, which is very positive for credit markets. Yields remain attractive, especially at the far end of the curve, which should keep investors focused on credit markets despite higher valuations. What we need to watch now is that as the rate-cutting cycle resumes and the stock market hits record highs, leveraged M & A activity may accelerate, potentially catching some credit investors off guard.