Webinar recap: Fixed income opportunities in a new market climate
03/12/2025 — Nationwide Financial hosted a recent webinar with the fixed income strategists behind two highly-rated Nationwide bond funds: Nationwide Amundi Strategic Income Fund, and the Nationwide Loomis Core Bond Fund. Below is a summary of the insights gleaned in the event which was led by Mark Hackett, CFA, CMT, Chief Market Strategist, Nationwide. Watch a replay of the webinar here.
To say the recent period for fixed income markets is unusual would be an understatement. The end of restrictive monetary policy from the Federal Reserve has lowered interest rates on the short end of the yield curve, while the long end has seen more volatility. Long-term rates are higher than two years ago, but the higher yield has not been enough to cover the corresponding losses in bond values.
So we’re stuck with a wide performance gap between bonds and equities, due in part to strong stock returns in recent years. This gulf in performance between the two major asset classes has called into question the effectiveness of the traditional 60/40 balanced portfolio. For example, an investor who held a 60% stock/40% bond portfolio over the past 10 years (2014-2024) without rebalancing would now see their allocation reach nearly 80% in stocks and 20% in bonds.
Uncertainties continue
Even with 100 basis points of Fed rate cuts at the end of last year, investors continued to allocate more cash to money market holdings. It’s not clear if investors are simply looking for a “parking place” for cash until other asset prices reset, or if this is a more permanent allocation decision. There haven’t been substantial money market outflows since the Fed began cutting rates, and with rates still reasonably attractive this may be a more lasting trend.
Despite the uncertainty in the markets and economy, credit spreads are near historic lows. There seems to be a disconnect between the low level of risk embedded in these narrow spreads and the higher risk explicitly noted in recent investor sentiment surveys. This is especially striking given the jump in bearish sentiment indicators such as the Investor Sentiment Survey from the American Association of Individual Investors, which occurred just one week after a record high for the S&P 500® Index.
The other obvious unknown is the direction of interest rates. We have seen a lot of rate movement through the cycle since the COVID-19 pandemic. There are compelling arguments on both side of the table for interest rates being significantly higher or lower over the next several years. That’s the level of confusion fixed income investors are facing at this juncture in the rate cycle.
Uncertain markets offer opportunities
Confusion may often mean higher risk, but it could also lead to opportunities for investors with flexible portfolio strategies. For more detailed information on these opportunities, watch a replay of the webinar or contact a Nationwide Funds representative for ideas on how to use Nationwide fixed income funds in investment portfolios.
Author(s)
Mark Hackett, CFA, CMT
Chief Market Strategist, Nationwide Investment Management Group
Mark Hackett is the Chief Market Strategist for Nationwide’s Investment Management Group, bringing more than 20 years of experience in the asset management industry to the role.
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