Summary

• Higher-for-longer interest-rate policy settings from central banks have been accentuated by widening term premiums lifting longer-term interest rates.
  

• Interest rates are not high relative to their longer-term history, but the recent rise is the most significant increase over a three-year period since 1980.
  

• Growth and labor market conditions continue to support a soft landing.
  

• Given the material lift in interest rates of late, and lags between monetary policy and the real economy, late-cycle risks, including earnings, growth, and credit, have risen.
  

• These risks are being accentuated by geostrategic and geopolitical shifts. Some have been positive for U.S. growth, such as reshoring at the expense of China. However, recent Middle East tension and higher oil prices add additional complexity to the required disinflation process.
  

• While some risks have receded, the International Monetary Fund notes the balance of risks as being tilted toward the downside. This supports caution and diversification in portfolio allocation and construction.