In an environment of pervasive macro risks, three themes in our 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.

Robert Tipp, CFA, Chief Investment Strategist and Head of Global Bonds, looks at the factors that may support fixed income performance amidst the relentless uncertainty as well as the divergent trends across global markets in “Tactical Turns in the Slow-Go Bull Market.”

As we distill the first quarter’s volatility and confusion, we see further economic moderation ahead with sizable risks to the downside. Not surprisingly, the tails of our 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. Find additional details in “Convergence in a World of Thick Tails,” by Katharine Neiss, PhD, Deputy Head of Global Economics & Chief European Economist.