Key takeaways

1. Higher tariffs and labor market weakness raise the risk of an economic slowdown. Near-term Fed action is likely.
2. U.S. rates are fairly valued at current levels and provide a hedge against recession risk.
3. Rising slowdown risk amid the late-cycle environment, combined with tight valuations, reinforce our up-in-quality bias in credit.
4. Municipals present strong fundamentals and, in longer-term bonds, robust relative value for tax-sensitive investors.

 

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