Risk/reward for many fixed income sectors has been shifting.

Aggressive monetary pressure finally saw meaningful impact in the first quarter, in the form of a bank liquidity crisis that required swift intervention by regulators to limit contagion. Markets reacted with volatility and, in anticipation of tighter financial conditions, came to reflect a potentially shorter route to the U.S. Federal Reserve’s terminal rate. In the upcoming months, we expect inflation to continue its decline, but believe that, after a Fed pause, central banks will be slower to ease than many expect. In this environment, we favor a focus on credit with a quality bias to defend against economic weakness.