Michael Goosay

Entering the second half of the year, interest rates will likely see a more bullish trend driven by slower economic growth and accelerated expectations for a resumption of Fed rate cuts.

Over time, this should lead to returns consistent with the long-term averages of the asset class. As most of the return from fixed income is duration-dependent, investors should look to parts of the fixed income market, such as investment grade and securitised credit, that are higher quality but still more sensitive to interest rate risk.

Key report findings

1. Policy volatility: an anticipated one-time inflation shock

 Markets continue to grapple with the competing forces of inflation resilience and slowing U.S. growth as the Federal Reserve holds policy steady in pursuit of its dual mandate. Tariff actions will likely trigger bouts of volatility as investors await the transition from trade frameworks to actual trade agreements. As inflation runs above target, investors await a one-off price shock tied to tariffs. In turn, as the U.S. economy likely slows, the stagflationary tilt to the outlook remains, and the U.S. yield curve continues to steepen in response.

2. Credit fundamentals: resilient as spread narrows into mid-year

Going forward, investor focus should shift to economy and the opportunistic credit fundamentals within the fixed income market. Slow growth should not be confused with recession, and headline risk and trade sensitivity will likely create wider dispersion among sectors. In this environment, active issuer selection and credit discipline are increasingly important.

3. Valuation resets create opportunity

Although spreads moved wider immediately after Liberation Day and then narrowed back through the final weeks of the quarter, further tightening is unlikely at this point. Nevertheless, emerging markets, securitized assets, and private credit present attractive risk-adjusted opportunities for long-term investors. Active management remains critical for navigating volatility and uncovering value.

Read the report.

By Michael Goosay, Chief Investment Officer, Fixed Income

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Michael Goosay

Principal Asset Management has announced that Michael Goosay has joined the firm as managing director of global fixed income and portfolio manager on select strategies.

Goosay will build upon the firm’s focus on multi-sector fixed income investment strategies and solutions to meet a wide range of personalised investor objectives. The fixed income platform (AUM of $135.7 billion1) has capabilities which span all major fixed income sectors with investment centers worldwide and over 110 investment professionals.

“Michael’s experience, leadership, and creativity will further bolster our already strong global fixed income capabilities. We look forward to his leadership and overall contribution in helping best serve our clients worldwide,” said Kamal Bhatia, global head of investments, Principal Asset Management.

Michael Goosay added: “I am proud to join Principal Asset Management as managing director of global fixed income. I look forward to building upon the firm’s robust fixed income capabilities to advance client investment objectives by tailoring the right strategies to achieve them.”

Goosay will take on leadership responsibilities across the platform. This includes being named as a portfolio manager on Principal Fixed Income’s flagship short-term income, core, core plus and US/global multi-sector strategies and associated products. The firm will continue to leverage time-tested investment processes and proprietary investment tools. The objective and investment philosophy of any impacted strategies will remain unchanged.​

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