Active Fixed Income Insight for Markets in Motion

Liquidity, Reserves & High Grade for Late Cycle Unknowns

Slowing global growth implications for fixed income markets and portfolios are explained by Matt Eagan, Co-head of Loomis Sayles’ Multisector team.

Matt Eagan, CFA®, Co-head of Multisector Full Discretion Team, Loomis, Sayles & Co., shares his fixed income market insight and how the team is positioning portfolios in this late cycle landscape.

  • Global growth is seen as the major risk: Global economy appears to be in a downturn, driven primarily by policy decisions and trade policy.
  • Active management is critical throughout the credit cycle, but more so during the later stages – as valuations of the market appear fair at best and security selection requires a greater degree of caution.
  • A significant amount of negative yielding instruments around the world, mainly outside the United States, is dragging down yields across the globe.
  • In their search for yield, investors have been taking on risk in less liquid areas and down in quality – which has compressed the risk premium normally found in equities and credit markets.
  • Building reserves, having liquidity, and upgrading to higher quality bonds are ways the Multisector Full Discretion Team is adding a degree of caution into portfolios.
All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Past performance is no guarantee of, and not necessarily indicative of, future results. This video is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed are as of October 14, 2019 and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

Bonds may carry one or more of the following risks: credit, interest rate (as interest rates rise bond prices usually fall), inflation and liquidity. Below investment grade bonds may be subject to greater risks (including the risk of default) than other fixed income securities.

CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.