TACTICAL TURNS IN THE SLOW-GO BULL MARKET

In this 2Q 2025 outlook, PGIM Fixed Income shares its views on the current economic environment and outlook for fixed income markets.

In an environment of pervasive macro risks, three themes in PGIM Fixed Income’s Q2 Outlook warrant emphasis:

Bonds are positioned for an extended period of solid returns, and they should outperform cash and equities if serious downside risks materialize;
Ongoing policy confusion seems destined to continue to prompt bouts of market turbulence that precipitate relative value opportunities;
The post-COVID bond market has been prone to dramatic overreactions followed by course corrections with a clear lesson: don’t confuse extreme market movements with changes in fundamental market trends.

As PGIM Fixed Income distills the first quarter’s volatility and confusion, they see further economic moderation ahead with sizable risks to the downside. Not surprisingly, the tails of their distribution have thickened as the global trading order gets turned on its head. In the U.S., the delta pertains to the tail scenario of rising recession risks. In the euro area, the latest tariff developments potentially offset some of Germany’s bold fiscal announcements.

The views expressed in this article are those of PGIM Fixed Income as of April 2025.

Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information, nor do we make any express or implied warranties or representations as to the completeness or accuracy. Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated, based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.

This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact their financial professional.

Prudential Investment Management Services LLC is a Prudential Financial company member FINRA and SIPC. PGIM Fixed Income is a unit of PGIM.

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