ZDB - BMO Discount Bond Index ETF

Given the backdrop, the priority for our fixed income portfolio is to focus on strong credit and to optimize yield at a shorter duration.

In the U.S., data that tracks the real economy appears to be slowing, but we don’t get the sense that the Federal Reserve is in any hurry to ease policy rates. That’s largely due to the potential from ​‘stickier’ consumer prices as tariffs start to make their presence felt.

One of the more important themes over the past several months has been the sell-off in the long-end across numerous jurisdictions.

Of course, this theme has been led by a combination of macro and idiosyncratic factors – the latter of which has resulted in considerable spillover effects.

As we update our quarterly portfolio strategy, we’re reminded of an important lesson that often must be re-learned. Namely, that markets are terrible at forecasting non-linear events.

To wit, we are preparing this edition just ahead of the ​“America First Trade Policy” memorandum is scheduled to be released. That release is expected to recommend additional country-specific tariffs to be implemented based on the principle of reciprocity and other non-tariff barriers. 

Additionally, tariff exemptions on USMCA-compliant imports from Canada and Mexico are set to expire on April 2^nd while the threat of sector-specific damage on autos, semiconductors and pharmaceuticals still looms large.

All prices, returns and portfolio weights are as of market close on September 30, 2024, unless otherwise indicated.