1.
Deploy cash into bonds: corporate and municipal credit quality is good, and cash rates are biased lower.
2.
Treasure curve volatility leads to a neutral-to-short duration preference, using short duration credit (IG, HY, munis) and balanced with structured products and taxable munis.
3.
Strong fundamentals create an attractive opportunity in structured credit and convertible bonds.
Policity rates have fallen: reinvestment risk still dominates portfolios.
Uncertainty about growth and inflation suggests higher and more volatile market interest rates, making duration an unreliable source of returns.
U.S. public credit quality is expected to remain very strong, supported by still-resilient economic activity.
1.
Deploy cash into bonds: corporate and municipal credit quality is good, and cash rates are biased lower.
2.
While the Q1 pace of European performance is likely not sustainable, we see tactical upside in ex-U.S. equities.
3.
Small caps are unlikely to outperform durably unless interest rates move lower while growth is resilient – unlikely this year.
We are at maximum policy uncertainty, but if earnings quality holds, equity market volatility can provide relief from high valuations and create buying opportunities.
Enthusiasm for U.S. assets is fading, while Europe’s increased defense and infrastructure spending faster interest rates cut offer potential upside.
The AI trend is here to stay, seen in investment in digital and energy infrastructure.
Consider deploying gains into high-yield corporate credit.
U.S. assets may strengthen amid geopolitical risks and oil shocks, supporting continued outperformance alongside balanced ex-U.S. exposure.
AI is likely to remain a key equity market driver, with sustained profitability, especially in tech.
Opportunities for diversification in U.S. large-cap value, high-quality small caps, and short-duration credit.
Markets have shifted from early risk-on to a geopolitically driven risk-off phase and back toward risk-on; higher oil prices may delay additional policy easing.
Diversify new equity allocations into materials and AI-linked infrastructure, along with high-quality small caps.
Keep U.S. small-cap and ex-U.S. developed exposure neutral, focusing on quality and AI/policy tailwinds.
Maintain full allocation to U.S. large-cap equities, prioritizing earnings quality.
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Maintain an underweight to floating-rate bank loans.
Economic resilience supports credit fundamentals, though some areas warrant greater selectivity.
Higher yields and wider spreads have improved income potential and provide a cushion against uncertainty.
The U.S. credit cycle is maturing; overall quality remains robust, though lower-quality segments (e.g., CCCs and parts of private credit) appear more vulnerable.
Balance short-duration exposure with longer-duration infrastructure debt, leaning into steeper municipal curves.
Keep IG/HY/muni credit duration shorter to manage rate volatility and credit risk.
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A “buy and hold” short-duration corporate credit approach can help maximize quality benefits while reducing rate sensitivity.
Deal activity has improved, but macro uncertainty and credit stress may temper opportunities.
Allocations continue to grow, increasing competition for high-quality assets, particularly in large deals; selectivity remains key.
Use resilient mid-market private credit and equity for qualified investor portfolios.
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Inflation may remain elevated due to tariffs, oil, supply chain shifts, and AI-related infrastructure spending.
Commodities and gold have historically diversified portfolios during inflation surges; recent geopolitical events reinforce this role.
Hedge inflation and geopolitical risk with gold and commodities, considering a ~5–20% allocation sourced from equities.
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Geopolitical shocks are becoming more frequent, influencing even traditional “safe haven” U.S. assets.