Top-Level Takeaways

• Financial markets faced fresh risks in March as the military action in the Middle East sent oil prices sharply higher.
• Fixed income credit was less reactive to the Iran conflict for much of March, but a prolonged conflict could threaten economic growth and increase credit risks.
• With private credit worries continuing to make headlines, we lay out a general framework for evaluating alternative investments.

March was a fresh reminder of how quickly the narrative can change in financial markets.

At the end of February, fed funds futures were priced for 60 basis points of rate cuts by the Fed in 2026. By the end of March, those projected rate cuts effectively disappeared. This coincided with a sharp increase in Treasury yields across the curve as oil prices surged higher than $100 per barrel amid the ongoing military conflict in the Middle East, which has greatly constricted the flow of energy and other materials through the critical Strait of Hormuz.

For much of March, the concern was inflation risk from a supply shock to energy prices, but by the end of the month, the bond market shifted somewhat to economic growth worries via demand destruction.

It has been a fluid situation, and the most pressing questions are:
• How long will this conflict last?
• How long will the Strait of Hormuz remain closed?

The answers to these questions will impact the ultimate economic costs.

Tracking a measure of market inflation expectations via TIPS breakeven yields, all three measures (1-year, 2-year and 5-year) are higher over the last month, but the market clearly views any inflation impact as a more short-lived phenomenon given the sharper run-up in the 1-year breakeven yield. This also underscores the idea of a prolonged oil price shock weighing on global economic growth, which is deflationary by nature.

On March 31, markets received some relief when the Wall Street Journal reported that President Trump was considering ending U.S. military involvement even if the Strait of Hormuz remained closed. On April 1, President Trump addressed the nation and said the war in Iran is “very close” to completion while also threatening escalation. The initial reaction from financial markets was higher oil prices and lower stock prices.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post Fresh Risks For Financial Markets appeared first on CreditUnions.com.

Top-Level Takeaways

• Financial market jitters increased in February amid heightened AI disruption fears and geopolitical tensions.
• The U.S. and Israel launched a major military operation against Iran, sending oil prices and Treasury yields sharply higher.
• Speculation that AI advancements posed a threat to traditional software companies sparked fears in both equities and private credit.

Financial market jitters escalated in February, even as economic data releases remained generally encouraging.

Two issues have primarily driven market anxiety: AI disruption fears and geopolitical tensions. The latter came to fruition this past weekend when American and Israeli forces launched a major joint military campaign against Iran, reportedly killing much of the nation’s senior leadership.

The initial market reaction included sharply higher oil and natural gas prices, a selloff in equities, and higher global bond yields. The latter was attributable to inflation concerns from higher energy prices. The Strait of Hormuz, just off the coast of Iran, was effectively shut down, cutting off the distribution channel for 20% of the world’s daily oil and light natural gas consumption. It will likely take some time for the dust to settle and markets to get a better idea of the ultimate objectives and potential timeline for U.S. military operations.

Before the U.S. military action on Iran, risk markets had been reeling from worries that accelerating AI development, particularly agentic systems, could cause significant disruption to many white-collar industries, most notably the software as a service (SaaS) sector. The S&P 500 posted its first negative monthly return since last April amid tariff volatility, and the tech-heavy Nasdaq composite index dropped 3.3% in February. The software and services sub-index of the S&P 500 produced a -10% return in February, illustrating the heightened SaaS concerns, and the index is down nearly 21% through the first two months of 2026.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post Financial Market Jitters Escalate appeared first on CreditUnions.com.

Top-Level Takeaways

• Financial markets responded to multiple noteworthy announcements in January, including the nomination of the next Fed chair.
• In an effort to lower mortgage rates, President Trump directed Fannie Mae and Freddie Mac to purchase $200 billion of mortgage securities.
• President Trump also nominated Kevin Warsh, a former Fed governor, as the next Fed chair despite Warsh being considered more hawkish in the past.

The first month of 2026 included multiple announcements consequential for the bond market and financial markets as whole.

President Trump and his team proposed multiple policy efforts aimed at improving affordability ahead of the midterm elections later this year, including a one-year 10% cap on credit card interest rates, a ban on institutional homebuying, and a $200 billion mortgage-backed securities (MBS) purchase program by Fannie Mae and Freddie Mac (FMs).

The credit card interest rate cap is perhaps the most controversial given the potential negative consequences on credit availability. However, market participants were relieved when President Trump suggested he would rely on Congress to pass a law to cap such rates, which is considered a less likely outcome.

On Jan. 8, Trump directed Fannie Mae and Freddie Mac to purchase $200 billion of MBS with the ultimate objective of driving mortgage rates lower. The administration has provided limited details, but it’s worth noting that the FMs had been buying MBS for several months, most recently at a pace of around $16 billion per month, an annualized amount of nearly $200 billion. The most recent disclosures showed the FMs bought $24.6 billion in December.

Agency MBS spreads tightened on the news, with 30-year conventional coupons trading closest to a par dollar price (e.g., 30-year 4.5% and 5.0% pools) moving the most (10 to 15 basis points versus Treasuries). However, in a typical “buy the rumor, sell the fact” trade, spreads retraced approximately half of that move during the remainder of the month, particularly after Bill Pulte, the director of the Federal Housing Finance Agency, said there would be no increase to the total purchase program size of $200 billion.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post Markets React To Consequential Announcements appeared first on CreditUnions.com.

Top-Level Takeaways

• 2026 begins similarly to 2025 as it relates to general economic and market sentiment.
• Watch for three economic themes for the upcoming year, from policy expectations to the digital infrastructure boom.
• As with all forecasts, there are risks in both directions.

We begin 2026 similarly to the year prior as it relates to general economic and market sentiment. While various pockets of worry and uncertainty persist, economists’ forecasts entering the new year are largely optimistic. The median economist forecast on Bloomberg for key economic metrics could best be described as “steady” in 2026. It was a strong year for most financial assets in 2025, and if the economy were to track current expectations, it would be another solid year.

Below are some economic themes we will be tracking over the next 12 months, followed by potential risks and more optimistic expectations.

1. A Quieter Policy Year

One of our 2025 themes was “messier than expected.” While markets focused on the Trump administration’s views on taxes and regulation as a strong economic tailwind, we worried that other policy decisions, particularly tariffs, could prove messy. As we enter 2026, and the consequential midterm elections loom later this year, we expect less noise on the policy front.

The Supreme Court has yet to rule on the legality of reciprocal tariffs using an emergency powers act. Regardless, the White House will likely try to avoid any new actions that spark a negative reaction from financial markets, whether trade, immigration, or other policy issues. If this proves true, it could lead to increased business investment, which lagged in 2025 for everything but data center build outs.

2. Digital Infrastructure Tailwind

Continuing that last thought, we saw a major uptick in digital infrastructure spending in the second half of 2025 for everything from computers and software to data and power centers. Up to this point, large technology companies had largely funded these expenditures with free cashflow, but that changed in 2025 with large corporate debt issues by companies like Oracle, Google, and Meta. We also saw a notable increase in securitized debt issuance for financing data centers, and this issuance is expected to accelerate in 2026.

While there are ample worries about the speed at which AI development is occurring and the associated costs, the spending should be a tailwind for overall economic growth this year. However, the notable debt supply will act as a headwind for fixed income spreads across several sectors, including corporate debt and asset-backed securities (ABS).

3. An Ongoing Struggle For Low-Income Households

As the year progressed, there were more references to a “K-shaped” economy in articles and media reports. This describes an economic expansion where high-income households thrive and low- and middle-income households struggle. Elevated inflation hits lower earners most, and consumer delinquencies have been more elevated relative to historical trends for borrowers with lower credit scores.

While inflation could slow modestly in 2026, it is unlikely that wage growth could accelerate enough to materially improve the current affordability issues for many low- and middle-income consumers. As such, credit risk will remain elevated for loans to these borrowers.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post 2026 Begins With Market Sentiment Similar To 2025 appeared first on CreditUnions.com.

Top-Level Takeaways

• It has been a noisy year for financial markets and the economy, but performance across several metrics has proven resilient.
• There is little consensus on the future path of the economy among Fed leaders and Wall Street economists.
• Credit union and bank profitability remained solid in 2025 amid widening interest margins and stable credit performance

A word we have used often to characterize financial markets and the economy in 2025 has been “noisy.”

A simple, yet technical definition of noisy is “accompanied by or introducing random fluctuations that obscure the real signal or data.” In this context, the real signal or data could be economic growth, the unemployment rate, performance in equity and fixed income markets, or the financial performance of banks and credit unions. The obscurities could be tariffs, threats to Fed independence, geopolitical tensions, and the longest government shutdown in U.S. history. To be clear, each of these could prove to have true economic costs rather than being merely distractions. However, thus far, the bark has been greater than the bite.

Although ample sources of economic uncertainty and worry persist, the same could be said for economic opportunity. As such, there is a wide dispersion of potential outcomes forecasted by Wall Street economists and Fed leaders alike.

The latter has been a heightened area of focus for financial markets in recent months as they try to assess whether the FOMC might be pivoting to a less dovish, or more hawkish, policy path. The minutes of the October 29 FOMC meeting and recent speeches by various Fed leaders suggest a growing contingent more worried about lingering inflation risk. However, as of Monday, the fed funds futures market showed a 100% probability of a December cut and nearly 100 basis points of rate cuts over the next year.

If the labor market proves to be on firmer footing than what the FOMC doves seem to believe, this scenario presents upside risks to bond market yields. However, if business investment remains subdued and unemployment rises, the Fed is more likely to continue lowering the policy rate, as is currently priced by fixed income markets. As always, interest rate directionality scenarios are relative to what is already accounted for in current yields across the curve.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post It’s Been A Noisy, Yet Resilient Year For The U.S. Economy appeared first on CreditUnions.com.

Top-Level Takeaways

• The Fed executed a 25-basis-point rate cut on Oct. 29, but forward guidance was less clear.
• Fed releases and public speeches highlight a sharp divide between FOMC hawks and doves regarding inflation and labor market risks.
• Headlines have brought pockets of credit markets into focus, including increased lending by commercial banks to non-bank financial institutions.

The FOMC moved forward with another 25-basis-point rate cut on Oct. 29. That cut was expected, but the forward outlook is a bit murkier.

Heading into the meeting, the fed funds futures market was pricing 100% probability of a December rate cut, followed by another 100 basis points of cuts in 2026. In a speech before the annual National Association for Business Economics (NABE) conference on Oct. 14, Jerome Powell had an opportunity to push back on market pricing, but the chair of the Federal Reserve instead focused on the role and size of the Fed’s balance sheet.

Powell then struck a notably different tone at the press conference following the Oct. 29 FOMC meeting.

“In the committee’s discussions at this meeting, there were strongly differing views about how to proceed in December,” Powell said in his opening remarks. “A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.”

The updated Summary of Economic Projections (SEP) released following the Sept. 17 FOMC meeting revealed a wide range of opinions on where the federal funds rate would end 2025, as well as the long-run neutral rate. In the speeches that followed that meeting, more dovish Fed leaders expressed concern that recent labor market softening was a harbinger for weaker GDP and reduced inflation in the months ahead. On the other hand, Fed hawks characterized the September cut — and the likely cut on Oct. 29 — as insurance against further weakness in the labor market. At the same time, they expressed hesitancy about doing much more policy easing amid ongoing inflation uncertainty.

This debate was clearly alive and well during the Oct. 29 meeting, which Powell even suggested should be clearer when the minutes are released. During the press conference, Powell said he believes most of the slowdown in hiring is more attributable to supply-side factors (labor participation and immigration) as opposed to the demand side of the equation (business investment). Fed policy typically has less impact on labor supply and more on labor demand. This is likely a critical factor in the current outlook of Fed hawks.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post Forward Guidance Less Clear After October Rate Cut appeared first on CreditUnions.com.

Top-Level Takeaways

• • Recent data suggests U.S. economic fundamentals remain relatively solid.
  • Consumers are not slowing down on spending amid solid income growth according, to September reports.
  • The range of FOMC participant opinions of the neutral policy rate is historically wide, with some feeling the current rate is only mildly restrictive.

The economic data released in September painted a picture of an economy on firmer footing than many expected amid the noisy headlines of 2025. The third estimate of second quarter GDP was revised higher to 3.8% quarter-over-quarter (annualized), the highest reading since the fourth quarter of 2021.
Although trade-related metrics from the first quarter clearly impacted that headline figure, there were also upward revisions to consumer spending and business investment. If excluding the impact of trade (including inventories), final sales to domestic purchasers were revised up to 2.4% from an initial estimate of just 1.1%. This metric is sometimes referred to as “core GDP,” and while still below the 3.35% average for 2023-2024, it shows no signs of imminent recession.
August personal income and spending data also revealed no signs of a softening consumer balance sheet. Real disposable income (ex-taxes/inflation) rose 0.1% in August and is on pace for a 1.9% increase in 2025 compared to 2.1% in 2024. Spending also outpaced expectations on both a nominal and inflation-adjusted basis.
Real consumer spending was negative for the first two months of the year amid heightened uncertainty before bouncing back. After adjusting for inflation, spending has averaged 0.37% growth in the past three months, or 1.47% annualized. The personal savings rate (income – spending) rose from 4.3% to 5.7% in the first four months of 2025 and has since fallen to 4.6% through August.
Sentiment surveys have been relatively weak in 2025, with many respondents pointing to tariffs as a primary worry, but it hasn’t yet been enough for consumers to slam the brakes on spending.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post The U.S. Economy Is On Firmer Footing Than Expected appeared first on CreditUnions.com.

Top-Level Takeaways

• • Financial markets have been mostly immune to political headline noise in recent months.
  • The White House ratcheted up its efforts to exert more influence over the Fed in August with Trump’s firing of Fed Governor Lisa Cook “for cause.”
  • Fed Chair Jerome Powell’s Jackson Hole speech was more dovish than many expected, increasing the odds of a September rate cut.

August is typically a quiet month in terms of financial market activity as vacation season winds down. Although there is no shortage of headline noise in the current climate, last month proved to be relatively sleepy in the bond market with the range of intra-month Treasury yields in August the least volatile since March despite plenty of Fed-related headlines and economic data releases. The month kicked off with a disappointing July jobs report that included a massive -258,000 revision to payroll growth estimates for the prior two months. For the bond market, it meant pricing in an extra 25 basis point rate cut in the next 12 to 18 months and more fully pricing in a September cut.

Speaking of the Fed, the White House’s campaign to exert more influence over the central bank ratcheted up in August. Earlier in the month, FHFA Director Bill Pulte posted a letter he had sent to Fed Governor Lisa Cook alleging mortgage fraud on social media. The allegation involves Cook listing two separate properties as primary residences on mortgage applications, and on Aug. 25, President Trump announced his firing of Cook “for cause.” The Fed governor filed a lawsuit challenging the termination, and the case is expected to land in the Supreme Court. The White House is likely hoping the court will overturn a 1935 decision that largely shields independent Federal agencies from political influence.

If Trump is successful in removing Cook, he would presumably have loyalists in a controlling majority of the Board of Governors, assuming current governors Waller and Bowman fall in that camp given recent rhetoric and policy votes. Of course, there are still four additional votes on the FOMC from the heads of regional Fed banks, so a majority of the Board of Governors doesn’t necessarily mean greater influence over the policy rate. However, they do have control over other initiatives, such as bank regulation, other policy rates (discount rate, IORB), and the approval of reappointments of regional bank presidents.

There is a reasonable debate about beneficial reforms at the world’s most influential central bank, but a perceived loss of political independence could have far greater consequences long term.

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post Markets Remain Relatively Immune To Political Headlines, Odds Of September Rate Cut Increase appeared first on CreditUnions.com.

Top-Level Takeaways

• • July came to a climactic end with several key data reports suggesting moderating growth.
  • The July jobs report was notably weak and included sharp downward revisions to the prior two months.
  • Home prices have fallen in recent months across much of the country, yet affordability remains historically low.

July closed with a bang, with the final week providing multiple economic reports of consequence and a Fed meeting. Overall, the data points to a still good but slowing U.S. economy. The initial estimate of second quarter GDP showed overall growth bouncing back following a negative first quarter, but much of that swing was attributable to inventories and trade. Excluding those categories, real final sales to domestic purchasers have fallen from 3% to 1.5% to 1.1% in the past three quarters.

The week capped off with the July jobs report, which included significant downward revisions to the payrolls growth estimates of the prior two months. The latter was enough to spark a sharp bull steepening of the Treasury curve, with front-end yields falling 25 to 28 basis points on expectations for more dovish Fed policy. Following the July 30 FOMC meeting, the market was pricing low odds of a September rate cut given the tone of the official statement and press conference. By the end of the next day, the market essentially priced in an extra 25-basis-point cut through the end of next year, and the probability of a September cut was raised closer to 90%.

The July jobs report was undoubtedly weak. Nonfarm payrolls added 73,000 jobs, which was softer than expected but not a terrible figure in isolation. However, the July figure was greatly overshadowed by a 258,000 downward revision to the prior two months, bringing the April and May payrolls growth figures to just 19,000 and 14,000, respectively. This would appear to align more closely with numerous business surveys this year suggesting that trade uncertainty was causing many to pause on investment and hiring decisions. The unemployment rate also ticked higher to 4.2% and was close to being 4.3% (4.248% unrounded).

Visit ALM First to read more about the latest economic data and overall monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post Multiple Economic Reports Bring A Climactic End To July appeared first on CreditUnions.com.

Top-Level Takeaways

• • Credit-risky financial assets performed well again in June as worries over tariffs and other risk factors dissipated.
  • Recent market surveys suggest higher levels of anxiety in the manufacturing sector related to tariffs, but that has yet to translate into material weakness in hard economic data.
  • There have been emerging signs of labor market cooling, but it’s still too soon for most Fed leaders to diagnose a material shift.

June was another strong month for credit-risky assets with the Liberation Day turmoil further in the rearview mirror.

The S&P 500 generated a 5.08% return last month, bringing the two-month return to 11.7%. As will be discussed in more detail throughout this commentary, fixed income credit also performed very well in June amid strong investor demand. Recent trading activity would suggest limited market worries about looming tariff risks to growth in the U.S. economy. However, the July 9 expiration of the 90-day pause of “reciprocal” tariffs for most trading partners presents some uncertainty.

The June Institute for Supply Management (ISM) Manufacturing survey suggests that sector’s businesses might be more anxious at this point than market participants. Within the responses, there were 3.2 companies reducing employee headcount for every one company hiring, one of the worst ratios since ISM began tracking employment comments, according to the report.

As we have noted in recent commentaries, soft data (e.g., surveys) doesn’t always evolve into hard data (actual economic impact), but there is clearly heightened anxiety surrounding trade policy and, to a lesser extent, immigration policies for manufacturers.

Visit ALM First to read more about the latest economic data and monthly market trends.

Jason Haley joined ALM First in 2008 and is the firm’s chief investment officer. He heads ALM First’s Investment Management Group (IMG), which is responsible for leading the investment process and investment theme development. Haley also oversees all capital markets activities, including portfolio management, trading, market research and commentary, and execution of hedging and funding strategies for the firm’s depository clients. He holds an MBA with a concentration in finance and a BBA with a concentration in marketing, both from The University of Mississippi.

Not an offer for investment advisory services. This content is provided for general educational information and market commentary purposes only.

The post A Strong Month For Credit-Risky Assets. Higher Levels Of Anxiety In Manufacturing. appeared first on CreditUnions.com.