Fourth Quarter 2023 Market OutlookFourthQuarter2023MarketOutlook

Economic shocks, market volatility, and geopolitical tensions make for an unpalatable investing stew. Rather than assessing each of these attributes in isolation, we view them as the contours of the new global paradigm referenced in our economic and market outlooks. As investors monitor the emergent risks, they likely need to reacquaint themselves with the opportunities in the new paradigm.

Driven by a level of value absent from the fixed income markets for decades, the traditional characteristics of fixed income investing—roll, carry, and income—are moving to the fore. These key aspects can generate performance that meets or exceeds investors’ objectives. Furthermore, should economies hit a surprise air pocket, there’s now ample room for yields to decline and provide an additional boost to returns.

The theme of broadening dispersion—and the attendant expansion in the investment opportunity sets—extends across economies and fixed income sectors. Indeed, we see the U.S. economy outperforming other major developed markets, while the emerging markets are experiencing greater dispersion on multiple levels. Credit sectors will likely experience further differentiation amidst the range of idiosyncratic developments and economic trajectories.