Bond Fund Commentary
High levels of inflation have pushed the Federal Reserve to tighten monetary policy via a higher federal funds rate and quantitative tightening. This tighter monetary policy led to another quarter of very poor returns within fixed income, with interest rates rising across the curve and credit spreads widening. As tighter monetary conditions work to slow economic growth, inflation readings should eventually moderate. We expect an environment of slowing economic growth and moderating inflation would be beneficial for high-quality fixed income assets.
Positioning the Bond Fund
Portfolio composition is subject to change.
The Fund is short of its benchmark duration. It has an overweight to the taxable municipal and non-agency asset-backed securities markets, favoring the more highly rated and more liquid securities within those sectors. We continue to favor moving higher in quality and liquidity as monetary and fiscal conditions become more restrictive.
Why Should Investors Consider Investing in This Fund?
The market has continued to price in ever more aggressive tightening from the Fed. The backdrop of higher interest rates and a strong U.S. dollar should eventually lead to moderating inflation. We expect the Fund to perform well in an environment of slowing growth and lower inflation.
Not FDIC Insured | No Guarantee | May Lose Value