Coming into 2014, most investors expected interest rates to rise at the beginning of the year following better economic growth. Of course, economic growth disappointed. And while many reasons exist for this disappointment, ranging from an inventory cycle to the often-cited effects of severe winter weather, the disappointment in economic growth coupled with concerns in overseas investment markets — particularly centered around emerging markets — led to lower interest rates.
While sporadic — interest rates will go up and interest rates will go down — our expectations for 2014 is as the inventory cycle runs its course and, more importantly, as the effects of severe winter weather begin to dissipate, we expect stronger economic growth to emerge. Along with this stronger economic growth should come expectations for a continued withdrawal of policy accommodation by the Federal Reserve and, along with that expectation, higher interest rates over the course of 2014.
Related by Topic: Economic Outlook , Fixed Income
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