CONTRIBUTORS
Paul Mielczarski
Head of Global Macro Strategy & Portfolio Manager
Preview
When forming a bond market outlook for 2025, the most difficult factor to account for is uncertainty around policy changes under the new US administration. There is a wide range of possible outcomes. We may see continued fiscal expansion, deregulation, and modest tariff increases. However, we may also see broad-based trade barriers, aggressive immigration restrictions, and at least a partial move toward fiscal consolidation.
In our Macroeconomic update, we look at:
- Bond market scenarios
- US exceptionalism overshoot
- European divergence
- Emerging market opportunities
- Strategy implications
Our base case scenario is that 10-year Treasury yields will trade in a 4% to 5% range in the coming months. What is uncertain is the skew of that distribution—are yields more likely to rise or fall?
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. Past performance is no guarantee of future results. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.
Fixed-income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls.
International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors.
US Treasuries are direct debt obligations issued and backed by the “full faith and credit” of the US government. The US government guarantees the principal and interest payments on US Treasuries when the securities are held to maturity. Unlike US Treasuries, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the US government. Even when the US government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities.
Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.