Mike Goosay, Chief Investment Officer and Global Head of Fixed Income for Principal Asset Management, joined Zoe Hunt, Host of RIA Channel, to discuss how active management can unlock opportunities across fixed income.
While Goosay remains cautious amid the current inflation environment, he notes that inflation has been steadily declining, a trend he expects to continue through 2027. With inflation still elevated and economic growth remaining robust, he points to an environment where investors can access attractive all-in yields.
Beyond traditional high-yield and investment-grade spread markets, Goosay highlights two less-recognized areas of opportunity: emerging market debt and municipal bonds. Within emerging markets, he points to deglobalization and commodity price pressures. Meanwhile, municipal bonds can provide attractive tax-advantaged yields.
Goosay also highlights the importance of active management as certain segments of the fixed income sector tied to lower-income consumers may face rising defaults, while companies serving lower- and lower-middle-income consumers may experience earnings challenges. He explains that active management creates opportunities to differentiate across industries and fixed income sectors rather than simply buying the beta.
Ultimately, Goosay encourages advisors to focus on three key drivers when making fixed income allocation decisions: interest rate risk, credit spread risk, and inflation. He notes that Principal Asset Management’s new suite of ETFs is designed around these drivers, enabling advisors to pivot their overall portfolio framework and manage risk.
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