How Long Can the Sweet Spot Last?

Aegon AM Fund Forum 2024


Author: Alicia Jiménez

Inflation in the US is coming down faster than nominal wage growth, creating a "sweet spot" that boosts real spending power and fuels consumption.

The sectors or industries most at risk if the US labor market weakens further are the cyclical parts of the economy, including manufacturing, retail, transportation, and construction.

Investment grade credit and secured credit such as leveraged loans are the most attractive credit sectors given corporate borrowing trends, while lower-rated high yield bonds and unsecured high yield bonds are the least attractive.

Investors should maintain some exposure to equities given expectations for moderate economic growth and rate cuts supporting markets, and increase allocations to fixed income as yields have risen.