A series of fixed income and currency macro viewpoints from Insight Investment’s lead portfolio managers, outlining current market conditions and positioning.
Companies with local supply chains offer shelter from tariff headwinds
US tariff announcements have had limited impact on most of our holdings because we favour companies with strong local footprints. A tin‑can producer, for example, may source steel and aluminium locally, manufacture nearby, and sell its products within a small radius – an operational profile that can shield it from tariff‑driven spikes in metals prices. These companies may lack glamour, but they typically deliver resilient cashflows. More broadly, we continue to focus on companies that can source domestically and have sufficient pricing power to pass higher costs on to customers. In some cases, tariffs can even make these companies more competitive as they cut off cheap foreign rivals. We’re already seeing improving financial results in areas such as US automotive supply chains. In Europe, the dynamic is different. Governments are beginning to back strategically important industries. The chemicals sector is a prime example, benefiting from preferential treatment and a more supportive regulatory environment. – Cathy Braganza, Senior Portfolio Manager High Yield and Loans
We believe that fiscal fears should ease in the wake of Prime Minister Sanae Takaichi’s election. Takaichi’s super majority means she should be able to push through most of her agenda, and since the election, she has been keen to reassure markets that fiscal easing should be contained. The Bank of Japan is now focusing on the level of the yen, with increasing evidence that the weaker currency is feeding into inflation. This means further rate hikes are clearly on the table as the Bank seeks to stabilise the currency. We believe a combination of rate hikes and a more benign fiscal outlook than many feared should support a flatter yield curve in the months ahead, with Japanese bonds looking attractive when hedged into US dollars or Sterling. – Harvey Bradley, Co-Head of Global Rates Investment
Credit dynamics remain underpinned but don’t get caught holding the wrong name. 2026 has opened with the heavy new‑issue calendar we anticipated, but even this elevated supply has been met with exceptional demand for investment‑grade credit. Strong Q4 earnings have reinforced the momentum in corporate profitability, outweighing concerns about tight spreads and leaving investors with few near‑term macro risks to point to. However, the market’s reaction function has shifted, with negative earnings surprises being punished more sharply than in the past. We believe this highlights that investors have little tolerance for holding credits that aren’t on a positive trajectory given the lack of reward for doing so. – April LaRusse, Head of Investment Specialists
We see US investment‑grade credit as one of the most compelling ways to lock in durable income while retaining the potential for capital appreciation as the Fed gradually eases policy. In a slower‑growth environment, equity markets may struggle to generate organic earnings expansion, but credit investors don’t need rapid profit growth to get repaid. At the same time, rising dispersion is creating fertile conditions for security selection and alpha generation. We favour the intermediate part of the curve, where carry and roll‑down dynamics are potentially looking particularly attractive. We are emphasising resilient sectors, such as systemically important financials, electric utilities and defensive industrials, while trimming exposure to issuers with higher leverage and consumer‑facing businesses with greater cyclical sensitivity. – Erin Spalsbury, Head of US Investment Grade Credit
We believe that accelerating growth and moderating inflation should underpin credit markets in the months ahead, with the lagged effects of monetary easing and fiscal expansion key to turning labour markets around. These fiscal measures have so far been underappreciated by the market – while easier monetary policy should boost smaller and medium enterprises as they primarily finance operations through banking channels which are based on shorter-term rates. In aggregate, this suggests a supportive environment for asset markets, despite valuation concerns. Forward-looking data is increasingly suggesting that the economy is gaining momentum. We expect the process of labour market stabilisation to continue, with inflation steadily trending down towards 2% in 2027, aided by services disinflation and labour market slack. – Emin Hajiyev, Senior Economist
Although we’re seeing some positive momentum in the data, there are several ongoing concerns. Labour market softness is worrying when considering declining immigration which should be holding the unemployment rate down. Meanwhile, consumption is increasingly being sustained by the upper‑income cohort, fuelled by easier financial conditions and wealth effects rather than broad‑based strength. Most FOMC members are still signalling that policy is at least mildly restrictive. However, the war in Iran increases uncertainty in the inflation outlook from sharply higher energy prices. Our view is that the window for further rates cuts is narrowing, although one additional cut from the new Fed chair is probable. Against that backdrop of an easing bias and geopolitical uncertainty, we continue to see value at the front end of the curve, though we’re maintaining a nimble stance to take advantage of any volatility. – Robert Bayston, Head of US Government and Short Duration
