Fourth Quarter 2025 Market Outlook

Across most developed markets, conditions keep pointing to one outcome: a “Muddle Through” scenario characterized by low to moderate growth with mildly-sticky inflation. Generous yields across public and private credit continue to drive the yield-is-destiny theme, which may gain a tailwind from downward rate pressure on certain monetary policy regimes. Explore our public and private fixed income outlook to learn more. Also included is an assessment of the macroeconomic backdrop and our sector views for the fourth quarter and beyond.

Key Convictions & Investment Themes                

Learn more about the three themes that shape our quarterly fixed income outlook:

Strategic Buy Zone for Bonds

The 2022 bear market lifted yields to levels not seen for more than a decade, positioning fixed income markets—particularly the higher-yielding sectors—for solid, long-term returns. The Fed’s return to easing mode should add momentum to this unusual bull market. Bottom line: fixed income is positioned for solid returns, and if serious downside risks materialize, it should also provide a counterweight to risk assets in portfolios.

Bond Bull Market of Distinction

The post-COVID market has been one of powerful cross currents—ranging from geopolitics and trade tensions to monetary and fiscal policies—resulting in notable performance dispersion across the global public and private credit spectrum. The dispersion is a stark reminder that just buying bonds and assets won’t do; success hinges upon positioning in the right parts of the yield curve, in the right sectors, and in the right currencies.

Look Through the Noise to Find the Fundamental Signal

As participants struggle to chart a course amidst the cascade of headlines, markets have been prone to dramatic overreactions and directional corrections. The lesson for investors is clear: don’t confuse extreme market movements with changes in fundamentals. Rely on in-depth research and credit underwriting to distinguish market spasms from true changes in underlying value and capitalize on reversions back to fundamentals.

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