Falling Interest Rates

The document anticipates continued interest rate cuts by major central banks throughout 2025. This projection stems from the belief that current rates, despite recent cuts, remain restrictive. The report states, "We think that as 2025 advances, most major central banks will want to bring interest rates back to a level that is neither stimulative nor restrictive for the economy." This creates a crucial context for other investment strategies, as lower rates are expected to impact returns on cash and drive investors towards alternative income-generating assets. The anticipated decline in cash returns necessitates a shift in investment strategy. The report advises, "We believe investors should position for lower rates by putting cash to work in investment grade bonds, diversified fixed income strategies, and equity income strategies to sustain portfolio income." This highlights the increasing importance of bonds and dividend-focused equities in a falling rate environment. The analysis suggests that current yield levels on quality bonds are attractive, making them a compelling alternative to diminishing cash returns.