Investment Strategy Insights: Winners and Losers in a Higher-Rate World

Recent progress on disinflation in the US has stalled somewhat, and potential reflationary pressures from tariffs, fiscal stimulus in China, and revised Fed forecasts of only one or two rate cuts in 2025 are reviving concerns about higher rates for longer. While we still expect a soft landing, featuring modestly below-trend US GDP growth of 0%-2% and successful disinflation to the target level, our attention has shifted to a scenario where US growth remains at trend-like levels or higher (2%-3%) over the intermediate term. Such a scenario would likely entail fewer rate cuts than currently indicated and 10-year yields stabilizing in the 4.5%-5% range. What would be the impact of such a growth and rate environment across asset classes?