Outlook for Core Fixed Income in 2021

Presented by

Brian Allen, SVP and Andrew Faderewski, VP at C.S. McKee

About this talk

How can an active investor add value in high grade fixed income with interest rates at all-time lows? We discuss our outlook for the new year, current portfolio positioning and evaluate the role of Core fixed income in risk portfolios. Topics addressed include: -Base/Bull/Bear case scenario for the economy. -How will interest rates, yield curve, spreads, rolldown and volatility impact returns? -Will the rally in Credit continue and which sectors of the market will perform best? -Will Agency Mortgages outperform Treasuries and other sectors in certain maturity ranges? -Does Securitized have any more room to run? ABS spreads (Autos and Cards) are at multi-year lows. Is there value in the more esoteric collateral, without undue credit or liquidity risk? -Value in Agency debentures? Our approach to this often overlooked sector. -Where is inflation headed and is there value in TIPS? Will the vaccine, reopening, and supply constraints (labor, capex, materials) lead to demand pull and supply constrained boosts to inflation? -How will the Fed impact returns? Are they really on hold (i.e. not going to raise the FFR) for the next 3-5yrs? When will asset purchases stop? Will there be another taper tantrum as in 2013? -What can go wrong? Sources of risk for the New Year including lack of fiscal stimulus, disruption in vaccine distribution, trade conflicts, tensions with Iran/North Korea, global trade, tax increases, healthcare reform, etc. Overly bullish investor sentiment and what it means for expected returns.

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