CPLB - NYLI MacKay Core Plus Bond ETF Q1 2025 Commentary
2025-07-02 11:04:00 ET
Market Review
- The first quarter of 2025 ushered in a new era of uncertainty and volatility. By late March, we experienced an abrupt shift in investor sentiment following aggressive trade policy announcements from the U.S. administration.
- We started the year with a consensus view on strong U.S. growth and weak inflation, but that view has since shifted to weaker growth and higher inflation.
- Although recession odds were initially limited coming into the year, at the time of this writing, most market forecasters increased their probabilities significantly following Trump’s tariff announcements on Liberation Day April 2nd.
- The Federal Reserve (Fed) remained on hold with markets initially pricing in two cuts in 2025. Pricing extended to four cuts once the degree and magnitude of the planned tariffs were clarified.
- Spreads across sectors generally widened in the quarter, led by underperformance from lower quality issuers; cyclicals lagged on expectations for slower growth.
- The Treasury yield curve bull steepened as rates fell further along the front-end. Fed Funds and 2-year rates inverted, which is unsustainable, in our view.