In the U.S., inflation is trending downward as well, although core inflation remains stickier. That said, the Federal Reserve has already started cutting rates, with an aggressive 50-basis-point move surprising many observers. “A cut of that size is typically reserved for crises,” Briggs notes, “but it seems the Fed is trying to front-load easing to get ahead of potential economic risks.”
The fixed income response
Briggs highlights the importance of being proactive and strategic in fixed income investments. “Duration is back in play,” he emphasizes. “We believe rates still have room to move lower, particularly in Canada, where economic conditions justify further cuts.”
Briggs points out, “Canada’s bond market is relatively small, and diversification is critical. Our fund leverages global markets and asset classes like high-yield bonds and syndicated loans to enhance risk-adjusted returns.”
The fund’s active management has also enabled it to respond effectively to market changes. “During periods of uncertainty, such as the Ukraine crisis, we’ve adjusted our exposures dynamically,” Briggs says. “Now, we’re finding attractive opportunities in the front end of the corporate yield curve, which offers high carry with limited sensitivity to interest rate and credit spread changes.”
Briggs also emphasizes the importance of aligning strategies with the evolving yield curve. “The Canadian yield curve remains inverted but is beginning to steepen. As central banks continue cutting rates, we expect the front end to shift lower, creating opportunities in duration.”