Fixed Income Investment Outlook Q2 2025

2025-04-16 05:00:00 ET

Summary

• The Trump trade regime hit like a monsoon on April 2 as the U.S. President introduced across-the-board 10% tariffs on imports, as well as potential 'reciprocal' tariffs on a range of trading partners, including 20% on the European Union, 46% on Vietnam and 34% for China (later increased to over 100%).
• With these announcements, markets were thrown into disarray as investors attempted to assess the possible ramifications across economies and asset classes.
• Overall fundamentals for the economy and bond market had been relatively constructive over the first quarter of 2025.

Riding Out the Storm

The Trump administration’s announced tariffs have introduced new turbulence to the markets as investors seek to assess the possible ramifications across economies and asset classes. While negotiations could ease their scope and severity, we believe that the net result could be to reduce economic growth and modestly increase inflation this year, adding complexity to central bank monetary decisions, but still providing room for rate cuts. Amid the dislocation, we are finding opportunities for careful credit selection, and anticipate that reshoring of foreign investment flows and a weak dollar may favor non-U.S. markets over time.

Announced tariffs could have long-term implications, but are already creating windows of opportunity across the fixed income markets. ...

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