Top 5 fixed income ideas for 2025

Despite high carry and continued spread tightening, fixed income markets generally delivered modest total returns in 2024, challenged by persistent inflation and concerns about fiscal sustainability. With central banks on the path to providing policy accommodation, and elevated yields still prevailing, we believe fixed income markets offer many compelling opportunities. Diverging monetary policies, geopolitical uncertainty, tariffs, and potentially heightened volatility ought to create attractive opportunities for sector rotation and security selection. We’re excited to share our top five fixed income ideas for 2025:

1. Unconstrained fixed income:  In our view, total return fixed income strategies that are less constrained by benchmarks may be best positioned to navigate this later stage of the economic/credit cycle, which we expect to coincide with heightened volatility.
   
   As central banks chart different policy paths, we anticipate continued dispersion in economic growth and inflation, creating market dislocations. We also think it’s important for investors to stay nimble with their portfolio allocations given the uncertain market and policy landscape. This entails sizable allocations to liquidity and developed market government bonds to be able to capitalize on market opportunities as they arise.
   
   Portfolio usage: Diversification, liquidity, derisking, total return
   Funding from: Cash or derisking from equities/credit

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