May 16, 2017
With spreads tight in investment-grade and high-yield corporate bonds, loans, structured credit, and Agency mortgage-backed securities, we expect an uptick in volatility this summer. The Federal Reserve is set to continue to raise interest rates—and at a faster pace than that which is priced in the market—which means positioning for a flattening yield curve will remain a major theme in our portfolios. Our view on the global macroeconomic environment is positive, which should support strong credit fundamentals for several years. We are also focused on the legislative complexities of passing President Trump’s pro-growth agenda. Failure to put his plans into effect in a timely manner may cause markets to realize that the Trump rally is long on promise and short on delivery.
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FEATURED PERSPECTIVES
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Credit spreads could get tighter in this liquidity-driven rally, but history has shown that the potential for widening from here is much greater.
Rational immigration policy, not rate cuts, is the way to avoid recession.
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