Some market participants are opining that the Fed may not be able to pull off a “soft landing” in which it successfully slows growth just enough to drive down inflation while avoiding an outright recession.
The success of this plan ultimately depends on dynamic factors that even experts struggle to forecast with certainty, such as the Russia/Ukraine conflict and inflation, creating challenges for investors trying to look ahead.
Given this uncertainty, multi-sector fixed income investing may enable investors to approach the current environment with a nimble, selective stance that helps drive returns.
Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities. High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities. Foreign Investing: Investing internationally involves additional risks such as currency, political, accounting, economic, and market risk. Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund. Market Volatility: Local, regional, or global events such as war, acts of terrorism, the spread of infectious illness or other public health issue, recessions, or other events could have a significant impact on the fund and its investments, including hampering the ability of the fund’s portfolio manager(s) to invest the fund’s assets as intended. Prospectus: For additional information on risks, please see a fund’s prospectus.
The Bloomberg U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS. The Bloomberg U.S. Corporate Investment Grade Index measures the performance of investment-grade corporate securities within the Bloomberg U.S. Aggregate Index. The Bloomberg U.S. MBS Index covers agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARM) issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The Bloomberg U.S. Asset Backed Securities (ABS) Index measures ABS with the following collateral type: credit and charge card, auto, and utility loans. The Bloomberg U.S. CMBS Index measures the market of conduit and fusion CMBS deals with a minimum current deal size of $300M. The Bloomberg U.S. Corporate High Yield Bond Index measures fixed rate non-investment grade debt securities of U.S. corporations, calculated on a total return basis. The Bloomberg Municipal Bond Index is a market capitalization-weighted index that measures the long-term tax-exempt bond market. The Bloomberg U.S. Government Intermediate Index measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury with maturities of 1 to 9.9999 years to maturity. The Bloomberg U.S. Government Long Index consists of investment grade rated U.S. Treasuries that have $250 million or more of outstanding face value, with remaining maturities of 10 or more years. The Credit Suisse Leveraged Loan Index tracks the investable market of the U.S. dollar denominated leveraged loan market. It consists of issues rated “5B” or lower, meaning that the highest rated issues included in this index are Moody’s/S&P ratings of Baa1/BB+ or Ba1/BBB+. All loans are funded term loans with a tenor of at least one year and are made by issuers domiciled in developed countries. The J.P. Morgan Emerging Markets Bond Index (EMBI) Global Diversified is a uniquely weighted USD-denominated emerging markets sovereign index. It has a distinct distribution scheme which allows a more even distribution of weights among the countries in the index. The EMBI Global Diversified has the same instrument composition as the market-cap-weighted EMBI Global. The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The MSCI ACWI Index is a free float-adjusted market-capitalization weighted index that measures equity performance of development and emerging markets, representing both large and mid-cap stocks. The Russell 2000® Index is a market capitalization weighted index of the 2,000 smallest companies in the Russell Universe, which comprises the 3,000 largest U.S. companies. The Russell Midcap® Index is a market capitalization-weighted index of medium-capitalization stocks of U.S. companies. The index is calculated on a total return basis with dividends reinvested. The FTSE Nareit Equity REITs Index is a free-float market capitalization-weighted index measuring equity tax-qualified real estate investment trusts, which meet minimum size and liquidity criteria, that are listed on the New York Stock Exchange, the American Stock Exchange and the NASDAQ National Market System. The index is calculated on a total return basis with dividends reinvested. The indexes are unmanaged, their returns do not reflect any fees, expenses, or sales charges, and they are not available for direct investment.
Duration represents the interest rate sensitivity of a fixed income fund. For example, if a fund’s duration is five years, a 1% increase in interest rates would result in a 5% decline in the fund’s price. Similarly, a 1% decline in interest rates would result in a 5% gain in the fund’s price. Yield shown represents yield-to-worst (YTW), which is the lowest yield generated, given the potential stated calls prior to maturity. Standard Deviation measures variability of returns around the average return for an investment portfolio. Higher standard deviation suggests greater risk.
London Interbank Offered Rate (LIBOR): A benchmark rate that some of the world’s leading banks charge each other for short-term loans and that serves as the first step to calculating interest rates on various loans throughout the world.