TCW Flexible Income ETF Q4 2024 Commentary

2025-04-03 16:27:00 ET

Summary

• With Treasury yields resetting higher, fixed income returns were negative as the Bloomberg U.S. Aggregate Bond Index fell 3.1% in the fourth quarter to bring the full-year advance to just 1.3%.
• TCW Flexible Income ETF lost 1.01% in the final quarter of 2024 based on net asset value, though it beat the Bloomberg U.S. Aggregate Bond Index by 205 bps, while the full year return of 5.97% was 472 bps ahead of the Index.
• TCW remains committed to our time-tested value-oriented philosophy, with bottom-up portfolio construction and relative value sector allocations the pillars by which we introduce carry and return potential to portfolios.

Review – The Economy: Breaking Down or Busting Out?

For an apparently fading economy that had sufficiently convinced the Federal Reserve to initiate monetary easing in September with a 50 basis point (bp) cut, the market emphatically cast doubts on that view to close out 2024. Embracing the growth outlook, broad equity indexes added to accumulated year-to-date gains while interest rates sold off to move higher. The summertime developments that brought Fed Chair Powell to an ease were labor market weakness borne of decelerating job creation and rising unemployment, even as inflation remained sticky and above its 2% target. Despite the Fed continuing to ease throughout the fourth quarter, the election results sparked renewed optimism for growth prospects and continued U.S. exceptionalism, driving intermediate and longer term rates higher as the yield curve bear steepened....

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