The US election delivered a decisive Republican victory, with the party securing the presidency and control of Congress. This outcome is poised to drive policy changes in 2025, introducing major uncertainties around  fiscal, trade and immigration policies. However, President-elect Trump's growth-oriented agenda will probably bolster economic expansion while generating potential inflation pressures. With the US economy demonstrating robust health, the Federal Reserve is likely to continue easing monetary policy, potentially ending its rate cut cycle earlier than anticipated. The eurozone and the UK remain on a downward rates trajectory.

This uncertain but growth-positive environment makes us prefer investment-grade corporate bonds over government bonds, as we believe they offer a better mix of duration and credit risk.  
 

We do not foresee a significant economic slowdown, despite sector-specific stresses, notably in the automotive industry. This environment presents valuable opportunities in higher quality high-yield credit, where we can capitalise on greater spreads and potential returns. The current market conditions are particularly supportive of fallen angels – bonds downgraded from investment grade to high yield ratings. These typically offer longer durations and higher quality, often within the BB rating range.

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