Outlook 2025: Robert Tipp (PGIM Fixed Income)
This text was originally written in Dutch
By Robert Tipp, Chief Investment Strategist, PGIM Fixed Income
Where are the biggest opportunities and threats for 2025?
'With short-term interest rates falling, the search for yield is increasing and the bull market in bonds is entering a new phase. Central banks' interest rate cuts are putting firm pressure on the appeal of “cash”. Investors are encouraged to seek refuge further down the yield curve, or buy fixed-income investments with longer maturities. At the same time, concerns about high equity valuations persist.
Bond funds are seeing strong inflows as a result of these developments in the money and equity markets. This could increase if cash yields fall further and investors look harder for higher returns. On capital market yields, those inflows exert downward pressure, while spreads may remain close to their historically low levels.
Meanwhile, US bond markets have been adjusting to stronger-than-expected economic data since the Federal Reserve meeting in September. It is possible that those data have now fed into prices, pushing yields to attractive levels.
The bottom line is that the bull market in bonds is far from over. Some consolidation in the short term is possible. But overall, the long-term outlook for fixed income remains favourable, thanks to yields and spreads that will move within a certain range or are about to fall from current levels.'
The bull market in bonds is far from over.