Fixed Income Investment Strategy — November 2023
November 17, 2023 — Fixed Income Investment Strategy provides an overview of Sage’s market outlook and sector positioning.
Market Outlook
- Rate markets have taken a volatile round-trip journey over the last couple of months. Fixed income returns have recouped much of the rate-related damage, with the Aggregate Index picking up 2% so far in November and now slightly positive for the quarter.
- Our base case is that the Fed is done hiking and yields will be capped by economic weakness into year-end and during 2024. We believe current yield levels (4.5% for the 10yr) are close to fair value, and we don’t see yields inching back toward 5%.
- Our economic outlook is for a mild recession in 1H24 as consumer strength is worn down by high rates and further erosion of excess savings. For fixed income investors, a fading consumer and capped rates suggest fewer return headwinds, but it also means being cautious on credit.
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