Global Fixed Income Strategy - November 2025
Global macro strategy
A regime shift worth positioning for
We believe the global macro environment presents a robust opportunity set for generating excess returns in global fixed income. Major policy shifts are reshaping the world economic landscape, including changes in long-held trade policies, regulatory frameworks and geopolitical alliances. In our view, varied fiscal and monetary responses across countries will result in divergent economic outcomes. We believe this environment presents a compelling case for international diversification and active management. We favor positioning for:
• Further US dollar weakness
• Steeper global yield curves
• Selective credit exposure
US policy as a catalyst
The current US administration is actively reshaping the long-standing status quo across trade, security and economic alliances. Key initiatives include:
Trade rebalancing: Targeting the USD1.2 trillion US goods trade deficit through tariffs and reshoring efforts.
Industrial policy: Incentivizing domestic US production to enhance employment and national security.
Security realignment: Encouraging increased defense spending worldwide, especially in Europe.
Asynchronous global policies and economic cycles
Against this US policy backdrop, the global economic cycle has become increasingly fragmented, with US trading partners experiencing different growth trajectories amid differing policy responses. In the US, tariffs and immigration restrictions are contributing to inflationary pressures and labor supply constraints, while outside the US, tariffs are less inflationary, but act as a drag on growth due to reduced access to US demand. This creates room for more aggressive monetary easing abroad, potentially positioning non-US fixed income markets for relative outperformance. Below we highlight our outlooks for the major economies and the US dollar.
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
Non-investment grade bonds, also called high yield bonds or junk bonds, pay higher yields but also carry more risk and a lower credit rating than an investment grade bond.
The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
The performance of an investment concentrated in issuers of a certain region or country is expected to be closely tied to conditions within that region and to be more volatile than more geographically diversified investments.
Mortgage- and asset-backed securities, which are subject to call (prepayment) risk, reinvestment risk and extension risk. These securities are also susceptible to an unexpectedly high rate of defaults on the mortgages held by a mortgage pool, which may adversely affect their value. The risk of such defaults depends on the quality of the mortgages underlying such security, the credit quality of its issuer or guarantor, and the nature and structure of its credit support.
