Fixed Income Investment Strategy — June 2024

June 4, 2024 — Fixed Income Investment Strategy provides an overview of Sage’s market outlook and sector positioning.

Market Outlook

• Navigating the current macro environment is reminiscent of teaching our teenagers to drive. One of the first lessons is the importance of using one foot, not both, to operate the pedals – to prevent inadvertently accelerating while braking. We find ourselves entrenched in a prolonged scenario where the concept of “higher for longer” persists, partly because the Federal Reserve is applying pressure on the brake pedal while fiscal spending has enthusiastically floored the gas.
• Although “the year of the bond” has been delayed, three dynamics are extremely supportive over the medium term – slowing growth, forthcoming rate cuts, and attractive yields. Weaker growth data over the last month coupled with a more dovish FOMC has taken the pressure off rates.
• Our current positioning could be broadly characterized by another driving lesson – know when to go the speed limit. The higher-for-longer outlook with cuts as the next move keeps us full duration; however, our overall risk, or tracking error vs. our benchmarks, is low.