Vanguard's Roger Hallam Expects Shallow Recession Due To Tighter Lending Conditions: 'Lot Of Policy Uncertainty Right Now'

Roger Hallam, global head of rates at Vanguard, reportedly said that tighter lending conditions following the recent bank collapses are likely to push the U.S. economy into a shallow recession in the second half of this year.

What Happened: “That backdrop of tightening lending standards is what we think drives the economy into recession in the second half of this year,” he said, according to a Reuters report.

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“There’s a lot of policy uncertainty right now,” stated Hallam, who sees high volatility in rates over the short term and upward pressure on yields on the short-end of the Treasury curve.

Harlam's comments come at a time when there is widespread expectation that bank lending will slow down, especially in sectors like commercial real estate.

In a recent interview with CNN, Treasury Secretary Janet Yellen said banks may become more cautious and tighten their lending amid recent banking failures. Doing so would negate the need for further interest rate hikes from the Federal Reserve, she had stated.

Price Action: U.S. markets ended in the green on Monday, supported by financial and industrial stocks. Investors and traders are watching out for a slew of corporate earnings this week while also awaiting comments by Federal Reserve officials, including Governor Christopher Waller and Governor Michelle Bowman.

The SPDR S&P 500 ETF Trust SPY closed 0.36% higher while the Invesco QQQ Trust Series 1 QQQ gained 0.09% on Monday.

Hallam also said that current levels for the benchmark 10-year Treasuries would be a “reasonably good opportunity” for investors to begin extending the duration of their portfolios in order to offset declines in risk assets, likely during a recession, according to the report.

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