The outlook for fixed income risk assets

We do not share some of the fixed income market’s concern over near­term recession risks, but we do recognise that we are in a very different environment than we were a year ago. Financial conditions have tightened, US fiscal policy stimulus should begin to fade, and political risks are likely to remain elevated in both the US and Europe. China is providing fiscal and monetary support to its economy, but we suspect that investors will remain unimpressed with the targeted nature of the effort – absent a material deterioration in the outlook, perhaps on any worsening of the trade dispute with the US, a return to full­bore Chinese stimulus is highly unlikely.