A Lesson from the Ghost of Tom Petty

ALM Strategy | Deposits | Interest Rates

Back at the end of 2018, I asked a question of all my clients during the Q4 ALCO meetings: “Which way will rates go next year?" At the time, the market consensus was the Federal Reserve was on hold, and that flattened out the yield curve. To make the poll a little more interesting and memorable, I offered up three Tom Petty songs and asked which best matched their outlook.

“Learning to Fly” suggested the concerns over the trade war that were bogging down growth outlooks would lessen, and the Fed would start raising rates again later in the year.

“The Waiting Is the Hardest Part” was indicative of a market waiting to see how the 2020 election cycle unfolded before rates would break meaningfully.

And “Free Falling” is self-explanatory: rates decline.