Actively Investing Through Paradigm Shifts
PGIM asset managers highlight key trends and related opportunities that they believe warrant the most investor attention as 2025 gets underway.
Dec 13, 2024
We have a positive fixed income outlook and see compelling entry points as growth and inflation dynamics widen and prompt uneven central bank responses.
Bullish bond conditions born out of the 2022 bear market persisted in 2024. Major central banks eased short-term rates during the year and further rate cuts may materialize in 2025. Global rate correlations should decrease as growth and inflation dynamics continue to widen, which should prompt uneven central bank policy responses. Against this diverging backdrop, we maintain a positive fixed income outlook and think current conditions offer a compelling entry point for investors, especially those on the sidelines or overallocated to equities after the stock market’s recent run.
Source: PGIM Investments using data from Bloomberg and Morningstar as of 11/30/2024
Although credit spreads are tight and vulnerable to short-term setbacks, fundamentals remain firm, as does net demand for fixed income as growth moderates. Default expectations generally remain below historical averages. This combination of factors suggests that spreads may remain in a historically tight range for some time to come. In terms of potential surprises, an unexpected acceleration in inflation, particularly based on the various core measures, could catch participants leaning the wrong way, making active management critical.
Co-Chief Investment Officer of PGIM Fixed Income
PGIM asset managers highlight key trends and related opportunities that they believe warrant the most investor attention as 2025 gets underway.
In its 1Q 2025 outlook, PGIM Fixed Income shares their views on the current economic environment and outlook for fixed income markets.
PGIM Fixed Income’s Greg Peters explains reasons why he continues to see a favourable backdrop for fixed income in the current rate-cutting cycle.
References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.
The views expressed herein are those of PGIM investment professionals at the time the comments were made, may not be reflective of their current opinions, and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither PFI, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation. 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.
For compliance use only 4085255