Welcome to the FIA News & Insights, a one-stop resource that includes insights from senior investment professionals on timely market events, their views on the economy and their respective markets. Find updates on the latest media information on Frost Investment Advisors, LLC and the most recent reprints, as well as, archival information for your reference.
2021 FIXED INCOME OUTLOOK
• Our expectation is that total returns for the U.S. bond market will be in the 1-1.5 percent range for 2021 cumulatively.
• If this turns out to be meaningfully incorrect, there is a significant chance that we have been overly optimistic, because there is a real possibility the U.S. bond market, or at least many sectors of the U.S. bond market, could produce negative returns for the coming year.
• The basis of this low expected return stems from improvement in the macro outlook as the impact of the pandemic lessens, leading to a rise in bond yields.
• The Federal Reserve is likely to keep monetary policy exceptionally easy, but this likely will result in a communication challenge as the foundation of the economy continues to improve.
• The credit markets will deliver some level of outperformance relative to U.S. government bonds, but this likely will be limited, as 2021 starts with valuations already frothy across many of the credit sectors.
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