bond price forecast 2010
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A stalemate over taxes and policy in Washington has created an uncertain climate for both individuals and businesses. The expectation that decade-old tax cuts would go away at year’s end has had a fiscal impact, even before the tax cuts are abolished. Those that are expecting higher taxes in 2011 will probably spend less and save more of their money in the next few months. All in all, consumers and businesses have a cautious outlook for the year to come. In our forecast for this year and next, we will assume that legislators will extend most of the tax cuts. As an alternative to that, the Obama administration is considering the implementation of measures to boost the economy and create new jobs. Lawmakers are stopping short of calling these efforts a “stimulus”, due in part to widespread public opinion that the previous stimulus package did nothing to help the economy. Uncertainty over public policy is combining with the uncertain economic climate, and choices over the next few months will dictate what’s going to happen in the long term. Further economic downturn will put more pressure on the Federal Reserve to invest in securities, and it may push 10-year Treasury yields to 2%. Putting an end to policy gridlock in Washington may stimulate our willingness to take risks, and it will definitely help the economy. | |