A combination of higher interest rate sensitivity amid rising rates and negative supply/demand dynamics have weighed on investment-grade (IG) corporate bonds year to date, but the remainder of the year may be more pleasant for investors. IG corporate bonds have been the worst-performing domestic segment of fixed income so far in 2018, lagging Treasuries, mortgage-backed securities, and the broad high-quality fixed income market overall [Figure 1].

Mix of Headwinds

With interest rates rising meaningfully this year, IG corporates have been under pressure since the group possesses the most interest rate sensitivity o

When will value have its day in the sun? The growth style’s historic run of outperformance has continued this year, despite the emergence of several drivers that have traditionally served as catalysts for value stock outperformance. Generally, value stocks benefit from an economic growth tailwind, whereas growth stocks tend to be more in favor when the growth potential they offer is scarce. Year to date, the Russell 1000 Growth Index has returned 9.5%, compared with just 0.5% for the Russell 1000 Value Index. Over the past 10 years, including the 2008–09 financial crisis, large cap growth stocks have outperformed value stocks by a

The Federal Reserve (Fed) is widely expected to hike rates for the second time in 2018 at the conclusion of its two-day policy meeting on Wednesday, June 13. Given that the hike is all but priced in, the hike itself would mean little to markets. Instead, Fed watchers will be looking at any meaningful changes in the policy statement, a new set of economic projections, and Chair Jay Powell’s post-meeting press conference to gauge any changes to the future path of interest rates. There’s a reasonable chance that the median expectation for the number of rate hikes in 2018 in the new projections may shift from three to four, but we bel

In hindsight, markets may have overreacted to Italian political risk, but the recent episode highlighted country-specific risk and the potential diversification benefits of high-quality fixed income broadly. Three months after Italy’s election, political uncertainty led to heightened concern that Italy’s populist coalition may try to pull Italy out of the European Union (EU) and Eurozone (countries that use the euro as their currency). The potential for Italy to be operating outside of the Eurozone prompted investors to reassess the risk of Italy’s government debt, leading to a large sell-off in Italian government bonds. Sho