TCW Corporate Bond ETF Q4 2024 Commentary

2025-04-03 15:14:00 ET

Summary

• TCW Corporate Bond ETF fell 3.59% in the final quarter of 2024 based on net asset value, trailing the Bloomberg U.S. Corporate Index by 56 bps, while the full year return of 2.19% was 6 bps ahead of the Index.
• TCW remains committed to our time-tested value-oriented philosophy, with bottom-up portfolio construction and relative value allocations, the pillars by which we introduce carry and return potential to portfolios.
• Industrial sectors closely tied to discretionary spending, like automotive and retailers, are less highlighted since elevated volatility should affect these areas the most.

Review – The Economy: Breaking Down or Busting Out?

For an apparently fading economy that had sufficiently convinced the Federal Reserve (Fed) to initiate monetary easing in September – with a 50 basis point (bp) cut, to boot – the market emphatically cast doubts on that view to close out 2024. Embracing the growth outlook, in an expression of dissent, broad equity indexes added to accumulated year-to- date gains while, more pertinently, interest rates sold off to move higher, especially out the yield curve. The summertime reflection that brought Fed Chair Powell to an ease was labor market weakness borne of decelerating job creation and rising unemployment, even as inflation remained sticky and above its 2% target. That rate “rebellion” started on cue from the September ease, with 5- to 10-Year U.S. Treasury yields up nearly 100 bps from mid-September to year-end, while the Fed eased two more times, delivering a “bear steepening” scenario. The bond market reaction was no doubt further abetted by an election outcome suggesting a more invigorated economy promising higher growth as virtue and potential tariff-induced inflationary effects as vice. Added up, though more of the rise DID come from the virtuous growth side of the ledger, it still meant for increased rates and generally disappointing bond returns as a result....

Read the full article on Seeking Alpha

For further details see: