Global Scale. Time-Tested Strategy.

Episode 2 Available Now!

PGIM Fixed Income's Podcast Series, All The Credit

In Episode 2 of All The Credit, Host and Senior Portfolio Manager Mike Collins welcomes Greg Peters, Head of Multi-Sector and Strategy, and Tom McCartan, Head of LDI Strategies, for a discussion about how active fixed income managers like PGIM Fixed Income extract alpha across global fixed income markets. In addition to discussing their recent paper on the topic, Capturing the Opportunity of Constraints, Greg and Tom also share their insights on their current best ideas in the fixed income market and where investors could benefit from market dislocations and mispricings.

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Capturing Value in Lower-Rated U.S. High Yield

Robert Cignarella, CFA, Managing Director, Head of U.S. High Yield

When evaluating allocations in the current late-cycle environment, the U.S. high yield market remains vastly bifurcated with overvalued BB-rated issues and some deeply discounted weak B- and CCC-rated names. Granted, there are risks to overweighting the lower-quality portion of the market, but given our base case for a prolonged credit cycle, the larger risk to performance could be maintaining overweights to the BB-rated segment of the market, particularly as lower-quality credit spreads imply a far higher default rate than we expect in 2020.

Can This Expansion Last Forever?

by Nathan Sheets, PhD, Chief Economist, Head of Global Macroeconomic Research, and George Jiranek, Associate, Global Macroeconomic Research

Every recession has its unique set of drivers and circumstances, but the transmission of those factors through the economy has exhibited notable similarities. Applying these insights to the current expansion, we have found the probability of recession in the United States to be remarkably low. The ongoing global expansion shares many features with the U.S. cycle. The similarities strike us as extensive and bear the imprint of a common global cycle. In this environment, investors’ attention will need to increasingly shift from macro issues to more micro issues. As such, we expect that debates regarding the appropriateness of asset prices will be increasingly front and center in the year ahead.

Recent Thought Leadership

The Implications of the U.S.-China Trade Deal Revisited

by Nathan Sheets, PhD, Chief Economist, Head of Global Macroeconomic Research, and George Jiranek, Associate, Global Macroeconomic Research

The completion of the Phase 1 agreement marks a cease fire in the U.S.-China trade war, and the deal underscores several persistent issues that we considered in a white paper published in April 2019. We find that China’s commitments to hike imports from the United States range from those that will be challenging to those that will likely be even more difficult. These concerns notwithstanding, we believe the agreement greatly reduces the probability of an escalating trade war during the year ahead, which should be positive for economic confidence and the markets.

When Social Contracts Fail: The Economic and Investment Implications of Social Protests

Francisco Campos-Ortiz, PhD, Latin America Economist, Global Macroeconomic Research, Mehill Marku, Senior Investment Strategist, Giancarlo Perasso, CEEMA Economist, Global Macroeconomic Research, and Cathy Hepworth, CFA, Co-Head, EMD Team

Throughout various corners of the world, signs of social unrest are surging in both the streets and the ballot boxes. In an attempt to understand the extent to which these developments could affect the economic outlook of the countries involved and to identify fundamental changes in alpha-generating opportunities, this paper begins by establishing a few common characteristics of the protests. It follows with a brief rundown of some of the most talked-about episodes as well as a discussion on the respective macroeconomic and investment implications.

Weekly View From The Desk: Economic, Interest Rate Update as Virus Concerns Expand


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1 Any discussion of risk management is intended to describe PGIM Fixed Income's efforts to monitor and manage risk but does not imply low risk. All investing involves risk, including the risk of loss.

It is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. The views and opinions expressed herein are those of PGIM Fixed Income and are subject to change without notice. PGIM, Inc. is the principal asset management business of Prudential Financial, Inc. (PFI) and is a registered investment adviser with the United States Securities and Exchange Commission.  PGIM is a trading name of PGIM, Inc. and its global subsidiaries. In the United Kingdom, and in various European Economic Area (EEA) jurisdictions, information is issued by PGIM Limited, an indirect subsidiary of PGIM, Inc.   PGIM Limited registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR is authorised and regulated by the Financial Conduct Authority of the United Kingdom (registration number 193418) and duly passported in various jurisdictions in the EEA.  These materials are issued to persons who are professional clients or eligible counterparties for the purposes of the Financial Conduct Authority’s Conduct of Business Sourcebook. In Japan, investment management services are made available by PGIM Japan Co., Ltd. (PGIM Japan), a registered Financial Instruments Business Operator with the Financial Services Agency of Japan.  In Hong Kong, information is presented by representatives of PGIM (Hong Kong) Limited, a regulated entity with the Securities and Futures Commission in Hong Kong to professional investors as defined in Part 1 of Schedule 1 of the Securities and Futures Ordinance.  In Singapore, information is issued by PGIM (Singapore) Pte. Ltd. (PGIM Singapore), a Singapore investment manager that is licensed as a capital markets service license holder by the Monetary Authority of Singapore and an exempt financial adviser. These materials are issued by PGIM Singapore for the general information of “institutional investors” pursuant to Section 304 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA) and “accredited investors” and other relevant persons in accordance with the conditions specified in Sections 305 of the SFA.  In South Korea, information is issued by PGIM, Inc., which is licensed to provide discretionary investment management services directly to South Korean qualified institutional investors.

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Any discussion of risk management is intended to describe PGIM Fixed Income’s efforts to monitor and manage risk but does not imply low risk.  All investing involves risk, including the risk of loss.  Fixed Income securities are subject to certain risks, including credit, interest rate, issuer, market and inflation risk.  Foreign and emerging market securities are subject to currency, political, economic and market risks, which may be enhanced in emerging market countries.  High Yield securities are lower rated securities that may have a higher degree of credit and liquidity risk.  Mortgage and asset-backed securities are sensitive to early prepayment risk, a higher risk of default and may be hard to value and difficult to sell.  U.S. government securities may not be backed by the full faith and credit of the U.S.; thus, these issuers may not be able to meet their future payment obligations.  With sovereign debt securities, the issuer or governmental authority that controls the repayment of the debt may not be willing or able to repay the principal and/or pay the interest when it becomes due, in accordance with the terms of such obligations.  Collateralized mortgage obligations may have unpredictable cash flows that can increase the risk of loss.  Public bank loans are subject to liquidity risks of lower rated securities.  The use of derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, correlation and market risks.

There is no guarantee that any investment strategy will achieve its objective under all market conditions or be suitable for all investors.  Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.  

The views and opinions expressed herein are those of PGIM Fixed Income and are subject to change without notice.

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