Where Goldman sees the best opportunities for income in the second half of the year
Amid the uncertainty around tariffs and the path of Federal Reserve monetary policy, investors can find attractive opportunities for income, according to Goldman Sachs Asset Management. The central bank opted to hold interest rates steady when it concluded its two-day meeting on Wednesday. The Fed still anticipates two reductions this year , but expects higher inflation and lower economic growth ahead. At the same time, the market is awaiting a resolution on tariffs. President Donald Trump 's deadlines for reaching trade deals is fast approaching, with the pause on reciprocal levies due to expire in July. "The next couple of months of data are going to be the proving ground for understanding how the tariff shock really is going to feed through the system," Simon Dangoor, head of fixed income macro strategies, said in Goldman's midyear outlook event this week. "There's still a lot we don't know about where tariff policy is going to end up. The uncertainty effect really builds with time," he added. "The next couple of months, where the data plays out, is going to be key for understanding how the Fed plays its hand." Dangoor said he expects the central bank to remain on hold at next month's meeting, but believes a path could open up for it to resume rate cuts later this year if the labor market weakens. Goldman's income play In this environment, Dangoor is focused on income as credit spreads are tight. "Credit spreads have gone back to being frustratingly expensive, but we think that that's underpinned by really quite good fundamentals in the corporate sector," he said. "We continue to see very disciplined behavior from corporates that leaves us wanting to build our portfolios for carry." Securitized products in particular have attractive income relative to risk, he said. Within securitized, he likes collateralized loan obligations — especially the AAA-rated assets, the highest quality part of the market. The Janus Henderson AAA CLO ETF (JAAA) currently has a 30-day Securities and Exchange Commission yield of 5.35%. Flows into CLOs remain strong, Dangoor noted. "Issuance of the underlying bank loans is reasonably soft, " he said. "That combination of a reasonably light supply of the underlying asset and the strong demand is something that we think will keep CLOs behaving very well and offering quite attractive carry to risk." "We like new issue CLO, where you get a such a long reinvestment period and an opportunity to create a portfolio of new vintage loans that's been underwritten to the current environment." he added. In addition, Dangoor sees select opportunities in commercial mortgage-backed securities because there is some value and space for credits to compress. In particular, he likes single-asset, single-borrower CMBS on a high-quality underlying office collateral. "If you're prepared to do the underwriting work, [they] can give you some comfort about recovery to really all scenarios and particularly where those single-asset single-borrower deals have been refinanced to the new prevailing interest-rate environment," Dangoor said. "We think that they are pretty robust structures and offer quite attractive value."
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CNBC
11 minutes ago
- CNBC
The Israel-Iran conflict and the other big thing that drove the stock market this week
It's been a tense and dynamic week for the world at large. The market action on Wall Street over the past four sessions was been anything but that. For the week, the S & P 500 lost 0.15%, the tech-heavy Nasdaq ticked up 0.21%, and the Dow Jones Industrial Average was basically flat, up a mere 0.02%. Beneath the surface, though, there was plenty of news for investors to digest. Here's a closer look at the biggest market themes during the holiday-shortened trading week. 1. Geopolitics: The major news story was — and still is — the intensifying war between Israel and Iran. The big question on everyone's mind is whether the U.S. will get involved. As of Friday, reports indicate that while President Donald Trump is actively reviewing options to attack Iran, nothing has been authorized. The White House has said Trump he will make a decision in the "next two weeks". As a result of the Israel-Iran conflict, investors spent the week keeping an extra close eye on the movement in safe-haven assets like gold and the dollar, as well as risk assets such as oil. Gold prices pulled back this week after their initial spike last Friday, which is when Israel's first attack on Iranian nuclear infrastructure jolted markets. The U.S. dollar index , meanwhile, strengthened this week but still remains near multiyear lows. Oil rose again for the week, with international benchmark Brent crude climbing nearly 4%. For those looking to gauge what the market thinks will happen with Iran, look to oil. The commodity is currently acting as something of proxy on the odds of the conflict intensifying and America directly entering the fray. 2. Fed updates: The other big theme of the week centered on the health of the U.S. economy in the lead up to Wednesday afternoon, when we got the Federal Reserve's latest interest rate decision and revised economic projections. Ultimately, the Fed kept its benchmark lending rate unchanged on Wednesday following its two-day policy meeting. The decision followed lackluster updates on the state of the consumer and the housing market , along with lower-than-expected inflation readings the week prior. As we outlined earlier this week , the Fed is in a tough spot when it comes to abiding by its dual mandate of ensuring price stability and low unemployment. The state of play requires nuance. On the one hand, there is evidence in support of rate cuts, namely some cracks in the consumer — even if the consumer has remained largely and impressively resilient — and the Fed's own updated outlook for lower real GDP growth and higher unemployment this year. On the other hand, the Fed is now expecting higher inflation this year than it did in March, which would support the need for higher interest rates. Given these dueling dynamics and the uncertainty around tariff impacts, the central bank's decision to keep interest rates steady makes sense. While the Fed certainly doesn't want to wait too long and make the same mistake we saw coming out of the Covid-19 pandemic, we must acknowledge that the causes of a potential rebound in inflation are different this time around. Tariffs will likely push up prices, but that may be a one-time increase, as opposed to the sustained inflation we saw exiting the pandemic, which was driven by massive supply chain disruptions and shifts in consumer behavior. As a result, we believe the apparent bias to be more worried about the job market and overall economic growth — and therefore cut rates later this year — makes sense, too. Indeed, the Fed's updated projections still pencil in two rate cuts in 2025, the same as in March despite the aforementioned revisions to its inflation and growth outlook. Fed Governor Christopher Waller made the case Friday that the cuts should start as early as July, arguing that the inflation risk posed by tariffs is not significant and ensuring resiliency in the labor market should be a higher priority. Waller's argument is basically that it's better to move now than wait for a jump in unemployment. Our biggest focus at the Club is staying nimble, given the highly volatile nature of geopolitics at the moment. No doubt, rate decisions are important to think about, but they're only one small part of the investing puzzle to navigate each day. For this reason, we continue to focus more on individual company fundamentals and industry trends rather than higher-level dynamics, important as they are to shaping our worldview. Cybersecurity stocks are one example that we highlighted this week. Another example would be the news we got from Club names Meta Platforms and Amazon this week on their artificial intelligence efforts. We think the implications that AI will have on the cost structures, revenue opportunities and efficiency gains should weigh far more heavily in the minds' of long-term investors than whether the Fed will cut in July or September. (Jim Cramer's Charitable Trust is long META, AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Yahoo
an hour ago
- Yahoo
Stock Market's Path Depends on Fed's View of What We Don't Know
(Bloomberg) -- For investors and traders trying to game out where the US economy, the stock market or interest rates are headed in the second half of 2025, good luck. There's simply too much uncertainty to be sure of anything right now. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Take it from Federal Reserve Chair Jerome Powell, who used variations of the word 'uncertain' nearly 20 times in his post-meeting press conference on Wednesday. Wall Street pros were looking to Powell and the Fed for clues about what's next in a world beset by risks — from escalating war in the Middle East to rising trade tensions between the US and China. But the answer they got was a resounding 'we don't know,' with the central bank remaining in wait-and-see mode before deciding whether it can safely start to lower interest rates. 'If anything, the Fed's read-and-react stance showed just how clueless everyone is right now,' said Scott Ladner, chief investment officer at Horizon Investments. 'As an investor, you cannot trade this, you cannot get ahead of it.' The S&P 500 Index is within 3% of a record high, but it's been holding tight in a narrow range lately. There have been just two sessions this month with moves of more than 1%, and the benchmark has barely budged over the past two weeks. It's been a surprisingly stagnant period considering oil has soared and the dollar has plunged on the global developments. Headline Swings The problem for equity traders appears to be a lack of clarity as sentiment changes from one headline to the next. You could see it in the stock market action late this week. On Thursday, which was a market holiday in the US, futures contracts on the S&P 500 sank more than 1% in the morning following reports that US officials were preparing for a possible strike on Iran in the coming days. Then, President Donald Trump signaled that he wanted to give diplomacy a chance, which halted the decline. And Friday morning Fed Governor Christopher Waller said he could see interest-rate cuts starting as soon as July, which sent S&P futures jumping into the beginning of the regular session. But those gains turned out to be short-lived as Iran and Israel traded missile attacks and news hit that the Trump administration is ready to crack down on semiconductor plants in China. After all the back-and-forth, the index closed down 0.2% on the day. 'The S&P 500 is not breaking out one way or another because we've got crosswinds,' Ladner said. Fed officials left interest rates unchanged this week, with the majority of voting members seeing at least two more quarter-point cuts this year. Those views are essentially guesses, however, because the pace of inflation in the coming months and the resilience of the labor market remain unknown in the face of mounting risks. 'No one holds these rate paths with a lot of conviction,' Powell said at his press conference. 'We expect a meaningful amount of inflation in the coming months, and we have to take that into account.' And Wall Street is positioning accordingly. A gauge of equity positioning fell this week, led by discretionary investors who went from slightly below neutral to more notably underweight, data compiled by Deutsche Bank AG strategists including Parag Thatte show. With that cut, aggregate equity positioning now sits in the middle of the bottom-half of its usual band, the data show. The mood among Wall Street prognosticators is equally mixed. Swaps traders are pricing in a roughly 62% chance the Fed will lower rates in September, but there isn't a lot of conviction backing those positions. Michael Feroli, chief US economist at JPMorgan Securities wrote in a note to clients Wednesday that he foresees one cut this year, at the Fed's December meeting. UBS's senior US economist Brian Rose said that while the bank's base case still calls for 100 basis points of cuts starting in September, he sees risks skewed toward a later start to easing. And Bank of America economists led by Aditya Bhave wrote in a note on Wednesday that they aren't expecting any rate reductions this year. Uncharted Territory 'The Fed too is facing an uncharted territory,' said Bill Sterling, global strategist at GW&K Investment Management in Boston. 'We haven't had tariff hikes this large in modern history, and there isn't an easy model they can go to.' The S&P 500 is up 1.5% for the year after a stunning rebound from the brink of a bear market in April, when Trump unveiled his sweeping global tariffs. The gauge soared 19% from April 8, just before Trump paused the bulk of his levies, through the end of May on hopes that the trade war wouldn't turn out to be as bad as feared. But since then, the S&P has been pretty much stagnant, taking a few steps forward and a few steps back as each new headline rolls in. 'Long-term investors will be wise not to make abrupt shifts in portfolio allocations due to news headlines,' Sterling said. The challenge for investors is that the same dynamics that powered the S&P 500 to gains of more than 20% in 2023 and 2024 — the emergence of artificial intelligence, strong corporate fundamentals, and a resilient consumer — remain intact. But what's holding back optimism is everything else, the uncertainty around policy, geopolitics, slowing growth and creeping signs of stress at the bottom end of consumer spending. At their meeting this week, Fed officials downgraded their estimates for economic growth this year and lifted their forecasts for unemployment and inflation. Economic data hasn't offered much help either, with indications heading in divergent directions. A slew of figures pointed to early signs of the economy slowing down. US factory activity contracted in May for a third consecutive month. Industrial production declined in May for the second time in three months. A gauge of imports fell to a 16-year low. Job growth moderated. And May retail sales fell by the most since the start of the year. But that flies in the face of the latest reading in the consumer price index, a key inflation gauge, which showed US prices in May rose by less than forecast for the fourth month in a row, suggesting consumers have yet to feel the pinch of tariffs. Of course, those numbers can change quickly if higher levies set in and inflation jumps. All of which makes a hard road even tougher for traders trying to figure out how to position for the second half of 2025. 'The Fed has laid out its reaction function,' said Kevin Brocks of 22V Research. 'But investors will have to wait and see what the impact of tariffs on inflation actually is.' Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P. 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Forbes
an hour ago
- Forbes
Leadership Falters As Climate Costs Soar And Time To Act Runs Out
CHARLEVOIX, CANADA - JUNE 9: In this photo provided by the German Government Press Office (BPA), ... More German Chancellor Angela Merkel deliberates with US president Donald Trump on the sidelines of the official agenda on the second day of the G7 summit on June 9, 2018 in Charlevoix, Canada. Also pictured are (L-R) Larry Kudlow, director of the US National Economic Council, Theresa May, UK prime minister, Emmanuel Macron, French president, Angela Merkel, Yasutoshi Nishimura, Japanese deputy chief cabinet secretary, Shinzo Abe, Japan prime minister, Kazuyuki Yamazaki, Japanese senior deputy minister for foreign affairs, John Bolton, US national security adviser, and Donald Trump. Canada are hosting the leaders of the UK, Italy, the US, France, Germany and Japan for the two day summit. (Photo by Jesco Denzel /Bundesregierung via Getty Images) London Climate Action Week is set to start, showcasing what urgent, inclusive climate action looks like when cities, financiers, and citizens unite. But the energy and innovation on display in London are being overshadowed by growing inaction from global leaders. Just days after the G7 failed to deliver any meaningful policy progress, and as the EU backpedals on its green regulation agenda, a troubling gap is emerging between local ambition and failures of international leadership. This retreat is happening at the worst possible moment. Climate damage costs are skyrocketing, climate science is sounding red alerts, and economic evidence points to a clear win: green investment can grow economies, create jobs, and protect communities. The world's most powerful leaders are not just missing an opportunity, they are magnifying a crisis. To grasp its scale, we need to look at the growing economic cost of inaction. The Price Of Delay And The Need For Leadership Bloomberg Intelligence has estimated that in the year to May 2025, the U.S. incurred close to $1 trillion (or around 3% of GDP) in direct climate-related costs from floods, wildfires, infrastructure damage, and insurance losses. Globally, heatwaves, droughts, and extreme weather are disrupting supply chains, inflating food prices, and undermining financial stability. Insurers have seen annual catastrophe losses surge tenfold since the 1980s. Premiums have skyrocketed, and coverage has shrunk, especially in wildfire and storm prone regions, exacerbating economic disruption and housing unaffordability. At the same time, the European Union appears to be shelving the Green Claims Directive, retreating under political pressure precisely when markets are demanding clear, consistent regulation to guide sustainable investment. This uncertainty discourages capital and undermines momentum. These setbacks comes as the OECD's 2025 Green Growth report shows that climate action could unlock $7.4 trillion per year in investment and job creation if scaled by 2030. Yet rather than harnessing this opportunity, many leaders are hesitating. Nowhere is this hesitancy more evident than in the recent action, or inaction, of the G7, whose decisions ripple far beyond their border G7 Paralysis And The Global Ripple Effect The G7's latest Chair's Summary reaffirms familiar goals, like limiting warming to 1.5°C but offered no timelines, targets, or tools to achieve it. 'Once again, the G7 chose safe, business-as-usual declarations over the bold, future-proof action we urgently need,' said Daniela Fernandez, CEO of Sustainable Ocean Alliance. 'The G7's latest climate commitments reflect a deeper issue,' added Ibrahim AlHusseini, managing partner of climate investor FullCycle. 'Global leaders are increasingly distracted by immediate geopolitical crises, and climate, still perceived as a medium to long-term risk, has slipped down the agenda. But this is a dangerous miscalculation.' He added: 'Delay is not neutral, it's an accelerant of future instability,' with direct consequences for supply chains, migration, and global financial systems. And it's not just experts calling for change. According to the 2024 People's Climate Vote, 80% of people globally want their countries to strengthen climate commitments, and over two-thirds support a fast transition from fossil fuels. Other surveys echoes this: 89% of people across 125 countries support stronger government action, yet many mistakenly believe they are in the minority. This public mandate for bold climate action stands in sharp contrast to the political hesitancy now on display. As political will may be stalling, another sector is responding. What was once viewed as an environmental issue is now a pressing financial risk. Climate Risk Becomes Financial Risk Inaction is not just costly, it is destabilizing. The financial consequences are already unfolding across insurance markets and beyond. "We have already seen residential and commercial insurance premiums rise and availability drop in recent years, in response to growing insurer losses," warns Tom Sabetelli-Goodyer, vice-president of climate risk at FIS. They are early signs of a broader, systemic threat. As climate impacts intensify, they are cascading through the financial system, affecting asset valuations, credit risk, and the stability of entire markets. Regulators around the world have begun to integrate climate risk into their frameworks, but last week, the Basel Committee on Banking Supervision, the global standard-setter for financial regulation, added its voice with a new framework for the voluntary disclosure of climate-related financial risks. While non-binding, the guidance marks a significant step and reinforces a clear message: climate risk is no longer just environmental, it's financial. As Julia Symon, head of research and advocacy at Finance Watch put it: 'Without clear, consistent data, supervisors are flying blind, unaware of the real risks building up on balance sheets.' The Climate Clock Is Ticking Scientific indicators confirm the urgency and the danger of delay. The 2024 Indicators of Global Climate Change report shows that the average global temperature from 2015 to 2024 reached 1.24°C above pre-industrial levels, with human activity responsible for nearly all of it. In 2024 alone, global temperatures spiked to 1.52°C, temporarily crossing the critical 1.5°C threshold. More troubling still, human-induced warming is accelerating at an unprecedented rate of 0.27°C per decade, the fastest rate ever recorded. At current emissions levels, the remaining carbon budget for staying below 1.5°C could be fully exhausted within just two to five years, depending on assumptions. Scientists also point to a growing Earth energy imbalance and early signs of amplifying climate feedback loops, such as ocean heat uptake and ice melt, which could further lock in extreme changes. The window for keeping global heating within safe limits is narrowing quickly. Yet even as time runs short, the economic case for prompt action continues to strengthen. Green growth offers a rare convergence of climate responsibility and financial return. Green Growth: A Trillion-Dollar Opportunity The OECD Green Growth report emphasizes that investing in clean energy and green infrastructure is not just responsible, its smart economics. Clean energy investment now outpaces fossil fuels, and 90% of global GDP is covered by net-zero targets. The report outlines how aligning financial systems with climate goals could unlock $7.4 trillion annually in investment by 2030. 'Green growth is an approach that seeks to harmonize economic growth with environmental sustainability and helps to deliver broader development benefits,' explains Jennifer Baumwoll, head of climate strategies and policy at UNDP. Far from hindering development, the green transition can generate resilient jobs, improve productivity, and enhance long-term competitiveness. In short, the report argues that climate action is not a cost but a catalyst for growth. Countries like Mongolia and Lao PDR are already demonstrating what this looks like in practice. In Mongolia, a green finance strategy, backed by the Central Bank and a new SDG-aligned taxonomy, has mobilized $120 million in climate-aligned investment, including the country's first green bond. Green lending is targeted to grow from 2% to 10% of all bank lending by 2030. Meanwhile, Lao PDR is advancing a national circular economy roadmap to reduce waste and resource use while unlocking economic opportunity. If fully implemented, it could create 1.6 million jobs and add $16 billion to GDP by 2050. These pragmatic, investment-ready models of climate action deliver real development gains. Their progress underscores a growing global divide: while emerging economies embrace opportunity, many developed nations are falling behind, precisely when their leadership is most needed. A Shrinking Window And Defining Test Of Leadership 2025 marks a critical juncture. Countries are expected to submit new national climate plans (NDCs 3.0) ahead of COP30 in Belém this November. Yet as of late June 2025, four months after the February deadline, only a small fraction had done so. Intended to reflect increased ambition following the Global Stocktake, most submissions remain overdue, and the ambition gap continues to widen. The UN expects a surge of last-minute filings, but tardiness isn't the only concern. Most existing plans fall short of aligning with the 1.5°C target, and the policy frameworks to deliver them at scale are still lacking. The challenge is not technical though but political. Instead of advancing, many major economies are retreating, weakening targets, delaying regulations, and rolling back commitments just as the case for bold action becomes stronger. Evidence shows that a well-managed transition can boost growth, reduce inequality, and build resilience. Yet that potential is being squandered. What's needed now is not just political courage, but real leadership, capable of driving structural reform and aligning finance with planetary boundaries. Decisive action today isn't only about avoiding catastrophe, it's about exercising leadership that can shape a more stable, equitable, and liveable world. The responsibility lies with those in power to act—not later, but now.
