The Fed’s monetary policy transition will continue to inject volatility into global markets, including U.S. fixed income (slide 4). Given our expectations that yields should rise further, we continue to recommend a below benchmark duration to help reduce negative price performance.
The Fed’s plans to reduce policy accommodation has taken a toll on virtually all traditional asset classes simultaneously. Despite U.S. fixed income’s underwhelming start to the year, we maintain our view that exposure to core fixed income plays a valuable role in asset allocation strategies and warrants a place in most long-term investment portfolios. Over longer time horizons, high quality fixed income provides portfolios with better risk-adjusted returns through the benefits of diversification, lower correlation to riskier asset classes, and reliable income.
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