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Virtus Viewpoints
Market Review and Outlook

The primary drivers of fixed income market performance remain largely unchanged from recent quarters. Geopolitical developments (e.g., trade, Mideast tensions, and European politics), recession fears, and central bank headlines all continue to be significant market movers. We continue to monitor market fundamentals, technicals, and valuations and are finding that the associated volatility is creating selective investment opportunities and shaping asset allocation decisions. Global central banks have embarked on monetary policy easing to support growth with more signs that further fiscal accommodation may also occur in the future. While the policy response has been supportive, the flight-to-quality mindset dominated the market.

Oil prices remain volatile as the pendulum swings between the implications for global demand as economies slow and supply disruptions/curtailments. The dollar has strengthened on relative U.S. economic performance and the Treasury curve continues to twist and shift broadly flatter and lower; some segments of the U.S. yield curve remain inverted. We believe that this change in the curve is more indicative of technical factors in the market rather than a looming U.S. recession and we will continue to monitor the incoming economic data to form our opinion.

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Bloomberg Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. Bloomberg Barclays Municipal Bond Index is a market capitalization weighted index that measures the long-term tax-exempt bond market. J.P. Morgan GBI-EMGD tracks total returns for local currency debt instruments issued by emerging markets sovereign and quasi-sovereign entities to which international investors can gain exposure. J.P. Morgan CEMBI Index tracks U.S. dollar-denominated debt issued by emerging market corporations. J.P. Morgan EMBI Global Index tracks the total return for the U.S. dollar-denominated emerging markets debt, including Brady bonds, Eurobonds and loans. The Credit Suisse Leveraged Loan Index is a market-weighted index that tracks the investable universe of the U.S. dollar denominated leveraged loans. The Bloomberg Barclays U.S. High-Yield 2% Issuer Capped Bond Index is a market capitalization-weighted index that measures fixed rate non-investment grade debt securities of U.S. and non-U.S. corporations. No single issuer accounts for more than 2% of market cap. The indexes are calculated on a total return basis. The indexes are unmanaged, returns do not reflect any fees, expenses, or sales charges, and are not available for direct investment.

The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

Past performance is not indicative of future results.

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