2025 Outlook: Global Fixed Income
Against a shifting macro, political and geopolitical backdrop, our fixed income portfolio managers explore the future prospects for high yield, emerging markets debt, and investment grade credit.
Colin Gordon: In thinking about the outlook for 2025 and beyond, Donald Trump’s victory in the U.S. presidential election is a key factor on many investors’ minds. What are the potential implications of a second Trump administration for each of your markets?
Brian Pacheco: A second Trump administration, at a high level, will likely mean stronger growth and less regulation—and the U.S. high yield market was very quick to price that scenario in following the election. From a sector standpoint, the effects of Trump’s policies on energy will be interesting. While energy rallied following the election, it's unclear whether a so-called “drill baby drill” scenario is necessarily a good outcome for the sector, or whether it will meaningfully increase supply—especially since prices, not regulation, have been the key determinants of energy supply in recent years. And of course, there are demand and geopolitical elements that could impact the picture as well.
Ricardo Adrogué: From a geopolitical standpoint, there is a perception that risks are waning now that the election is behind us. That may be true to an extent—especially regarding Russia-Ukraine and the Middle East—but I do have nagging concerns that the market may be getting overly optimistic given the vast array of complicating factors surrounding each of these geopolitical crises.
Omotunde Lawal: With regard to both emerging markets (EM) and European corporates, tariffs are a major source of uncertainty under Trump 2.0 and an issue we’re monitoring closely. For EMs, China is the biggest unknown and the most material to the global economy. Under the first Trump administration, we saw a reorientation of trade from China to other parts of the world. Looking ahead, we expect there to be winners and losers across EMs in a global tariff war.
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