Our First-Quarter Outlook features some common themes that permeate the fixed income landscape as the new year commences. After a stretch of strong beta performance, the current market dispersions and moderations point to an environment where alpha appears set to outperform. This backdrop underscores the importance of relative-value analysis as well as the ability to play the “seams” across asset classes and sectors. Yet, the macro risks appear palpable with central banks withdrawing accommodation, China’s growth slowing, and COVID refusing to disappear.
In “Simmer Down Now,” Robert Tipp, CFA, Chief Investment Strategist and Head of Global Bonds, expects the moderation to go a long way toward soothing bond investors after a turbulent 2021.
Although early policy retrenchment risks economic scarring, Katharine Neiss, PhD, European Chief Economist, explains in “A Moderate Global Outlook Marks the Pandemic’s Next Phase,” that central banks will eventually confront some familiar secular factors that restrain inflation as they did over the previous decade.
Our portfolio managers subsequently indicate how these themes are influencing the risks and opportunities within their respective sectors.