By Davide Barbuscia

U.S. Asset Managers Anticipate Continued Price Pressures

NEW YORK (Reuters) – Giant U.S. asset managers, overseeing over $20 trillion, are expecting ongoing price pressures this year due to President Trump’s immigration and trade policies, which could threaten the bond market.

Vanguard, the world’s second-largest asset manager managing over $10 trillion, in its first-quarter fixed income outlook, reported that it anticipates “progress on inflation to stall,” with core price measures remaining above the Federal Reserve’s 2% target and above 2.5% for most of 2025.

Trump’s trade and immigration policies could further complicate inflation and growth forecasts, according to a report by Vanguard’s active fixed income team led by Sara Devereux.

While Vanguard’s base outlook is positive, they highlighted the uncertainty created by the incoming administration that broadens potential outcomes for growth, inflation, and monetary policy both domestically and abroad.

Investors are awaiting new policy announcements on tariffs, immigration, and tax cuts. Trump recently announced plans for tariffs on the European Union, discussing a 10% duty on Chinese imports and potential 25% tariffs on Canada and Mexico starting February 1.

The impact of these policies on growth and inflation will vary depending on their scope, according to Libby Cantrill from PIMCO and economist Allison Boxer. In scenarios with increased tariffs and growing budget deficits, growth could slow while inflation rises. They project core inflation could increase by 20 to 40 basis points in the U.S. by 2025, with similar negative growth effects.

Vanguard warned about tariffs’ potential negative impact on growth, which could increase business uncertainty and further restrain growth.

Rising Yields

U.S. government bond yields, which rise as prices fall, have increased in recent months, partly due to pro-growth expectations under the Trump administration. Following Trump’s inauguration, 10-year yields marginally declined to 4.65% from a one-year high of 4.8%, but remain about 100 basis points higher than in September when the Fed began easing rates.

BlackRock, the world’s largest asset manager with $11.6 trillion in assets, anticipates yields will continue to rise due to higher inflation and increasing government debt levels. It remains bearish on long-term government bonds, expecting 10-year yields to exceed 5%.

The BlackRock Investment Institute noted, “We have never before seen today’s combination of sticky inflation, higher policy rates, and high and rising debt levels,” indicating a delicate equilibrium supporting demand for long-term bonds.