Bryan Hazelton, CFA, Portfolio Manager for Loomis, Sayles & Company, an affiliate of Natixis Investment Managers, joined Keith Black, Managing Director for RIA Channel, to discuss economic growth, AI investment, and fixed-income opportunities.
Hazelton explains that resilient economic growth, supported by consumer spending, AI investment, and U.S. manufacturing, alongside persistent inflation, has reignited interest rate hikes globally. He anticipates three additional Federal Reserve rate hikes over the next 12 months, bringing the federal funds rate closer to 4.75%.
With rising government debt, fiscal pressures, and geopolitical tensions, Hazelton also highlights their influence on bond yields. He explains that growing deficits and debt issuance are leaving governments with less flexibility to respond to unexpected economic downturns or geopolitical shocks. With inflation and central bank risks affecting the front end of the yield curve and fiscal risks impacting the long end, he favors the five- to seven-year portion of the curve.
Turning to corporate credit, Hazelton notes that balance sheets, earnings, and profitability remain strong, although increasing dispersion reinforces the importance of selectivity. While optimistic about AI’s long-term potential, he highlights the risk of spending outpacing demand, with approximately $3 trillion in capital needed through 2028. He explains that companies are seeking AI financing across public and private markets, creating opportunities that require disciplined underwriting.
Hazelton also identifies income, total return potential, and active management as three compelling reasons to consider fixed income today. He explains that elevated yields offer greater income potential and predictability, while investors can build high-quality investment-grade allocations with attractive total return potential. He also highlights how yield curve volatility and credit market dispersion reinforce the value of active management.
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