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Risk assets, like stocks and non-government fixed income spread products, pulled out of their nose dives with strong performances in Q1 2019. Why?

April 17, 2019

Early October 2018 was only six months ago, but it may feel even more distant considering the 10-year yields in the U.S., Germany, and Japan were trading around 3.20%, 0.58%, and 0.16%, respectively. At the time, PGIM Fixed Income provided their most recent forecast for the long-term central tendency for G3 rates. While it was not anticipated to reach these levels as soon as Q1 2019, they arrived amid further evidence of sluggish global economic growth, contained—if not below target—inflation, and significant policy responses by major central banks.

In “Whiplash!,” Robert Tipp, CFA, chief investment strategist and head of Global Bonds, looks at the strong performances in Q1 and the factors that may affect the markets going forward.

“Overall, the evidence of sluggish growth seems to point to a continuation of the trend towards low (and lower) developed bond yields—a formula that perpetuates a global search for yield,” Tipp writes. “On balance, that should create a favorable return environment for spread product, and bouts of volatility may continue offering above-average opportunities to add value through sector allocation, issue selection, and positioning in currencies and interest rates.”

Of the specific factors that contributed to the general malaise in Q4 2018, Nathan Sheets, chief economist and head of Global Macroeconomic Research, describes how each of these reversed or moved toward reversal in Q1 2019. As a result, the global economic outlook in “Back From the Brink—But What Next?” is one that appears well supported, but with numerous risks:

“All told, we anticipate that the global economy will put in a solid, albeit lukewarm, performance this year, expanding 3.5%, slightly less than its average since 2000,” Sheets writes.

Read the full PGIM Fixed Income Q2 2019 Outlook and find more Q2 2019 views on

For a media interview with Robert Tipp or Nathan Sheets to speak about market or economic conditions, please contact Claire Currie.