Fixed Income Investment Strategy — January 2025

January 17, 2025 — Fixed Income Investment Strategy provides an overview of Sage’s market outlook and sector positioning.

Market Outlook

• Although recalibrating risks and adjusting Fed expectations have been challenging, bond investors are better positioned for 2025 than it might initially appear. Markets have been highly effective in accounting for increased uncertainty, leaving rates better priced for fiscal uncertainty and a “no landing” scenario.
• Our outlook for the year focuses on the structural support to fixed income in the form of attractive all-in yields, which provide a strong base for returns and relative value vs. other assets. Core investment grade yields above 5% offer a cushion to rate volatility and total returns. When compared to the earnings yield of just over 4% for the S&P 500, this yield gap is the best relative value for fixed income since 2007.
• Our game plan into 2025 is to lean into income carry and drive yield through relative value opportunities and security selection, but keep overall portfolio risk low.