Despite a confluence of economic shocks in the first quarter, markets have held up remarkably well, but cracks appear to be forming beneath the surface.

Fixed income performed well in 2025, but we are proceeding cautiously, as we believe headwinds in the new year could cause the rally to stall.

Sentiment in the fixed income markets remains bullish and issuance is robust, but spreads are tight so we are staying defensive and investing opportunistically.

Investment grade bonds have long been synonymous with a “core” fixed income allocation, but we believe a flexible strategy also belongs in most bond portfolios, as managers can adjust their exposure based on market conditions.

Credit indices rallied during the third quarter, despite a variety of economic headwinds, and it appears FOMO (fear of missing out) is fueling the bullish sentiment more than fundamentals.

As we survey the economic landscape, we are reminded of Otis Redding’s classic hit, which is all about patience. “Looks like nothing’s gonna change, everything still remains the same.”