Today’s macroeconomic environment presents a unique challenge for bond investors — but also an opportunity. For Connor Fitzgerald, CFA, Fixed Income Portfolio Manager at Wellington Management, success lies not in making precise predictions, but in staying prepared for a range of potential outcomes.
A key approach is identifying market consensus — and then questioning it. For instance, market pessimism around US consumer finance in 2023 overlooked the sector’s resilience. Similarly, investor optimism around a potential second Trump administration underestimated risks stemming from tariffs and and may still be underestimating the impact of restrictive immigration policies.
The potential solution? Flexibility, underpinned by discipline. A nimble, unconstrained strategy can help investors draw value from uncertainty, but only if paired with a robust framework for assessing upside and downside risks. According to Connor, investors also need to keep an eye on total returns, not just yield, and maintain sufficient liquidity to take advantage of future dislocations.
Read the full article to explore how uncertainty can create opportunities in fixed income
