Why the bond market should expect more volatility ahead

Federal Reserve Chair Jerome Powell is testifying for the second day before Congress as the US continues to grapple with inflationary pressures. Tocqueville Asset Management portfolio manager John Petrides and WisdomTree head of fixed income Strategy Kevin Flanagan join Catalysts to break down the market reaction to Powell's comments and how investors should best position their portfolios amid the current economic backdrop.

Flanagan explains that the Fed is in a precarious balancing act when it comes to initiating a rate cut: "The Fed does not want to make a mistake here one way or the other, right? They don't want to be on hold too long, but they don't want to cut rates too soon. So it is kind of a tightrope that Powell and company are walking." He explains that the bond market will experience some volatility as the Fed continues to weigh the timing of its first rate cut.

Petrides notes that overall market volatility has been "strangely quiet" recently. However, if volatility were to increase, he believes the Fed will likely change its language to be more market-friendly. He points to gold (GC=F) as a smart investment amid economic and geopolitical uncertainty, explaining, "We think there's way too much uncertainty with the amount of debt the US has on the balance sheet. Gold typically does well when interest rates come down, so if the Fed is in the process of starting to ease, that will benefit gold."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl