Fixed Income Asset Allocation Insights: A December Fed Hike Could Spur Volatility

A December fed hike could spur volatility

Robert Vanden Assem, CFA
Head of Investment Grade Fixed Income and Chairman of Fixed Income Asset Allocation Team

Our target allocations remain unchanged. We continue to favor investment grade credit and securitized products and remain underweight high yield and emerging markets (EM) debt. Credit spreads remain well supported by an extended search for yield, with levels now at or near the year-to-date tights. However, we see the potential for volatility ahead amid a climb higher in Treasury rates, retail out ows from mutual funds and ETFs, lower oil prices, and uncertainty in the US about the elections on 8 November and the Federal Reserve meeting on 14 December. Given this backdrop, we believe high yield and emerging markets debt asset classes may provide more attractive entry points in the months ahead.

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