Fixed Income Investment Strategy — April 2025

April 24, 2025 — Fixed Income Investment Strategy provides an overview of Sage’s market outlook and sector positioning.

Market Outlook

• Extreme rate volatility and inconsistent trade policy messaging have caused periods of disorderly selling in bond markets and confusion about what are considered safe-haven assets. Since rate volatility is not going away in the short-term, we believe positioning for the medium-term is important.
• We expect to avoid a severe liquidity crisis, but not a recession, which will keep demand firm for safe assets, bias rates lower overall, and support core fixed income returns. Inflation and shrinking foreign demand for Treasuries will keep pressure on long-end yields; however, we expect the Fed to view tariff-driven inflation as temporary, and that they will still look to ease later in the year.
• For core fixed income, key structural support remains in the form of attractive all-in yields, which provide a strong base for returns, and favorable relative value vs. other assets. Core investment grade yields near 5% offer a cushion to rate volatility, and when compared to low historical equity earnings yield, still provide fixed income its best relative value in 15-plus years.