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Jeffrey Sherman: Reckless or Wreck Less

DoubleLine Deputy CIO Jeffrey Sherman in an April 8 webcast titled, "Reckless or Wreck Less," shared his insights on the current economic landscape and volatile fixed income markets. He emphasized the unpredictability of tariff policies and their impact on the market, noting significant revisions in GDP forecasts due to inventory adjustments and the inclusion of gold in trade deficit calculations. Sherman pointed out that the first quarter estimates are now around -1%, reflecting less robust growth than previously anticipated. Sherman discussed the broader implications of tariff policies, stressing that they could lead to higher prices for imported goods and affect various regions differently. He explained that while some areas might face severe tariffs, others like Latin America and Australia might experience lower rates. The ongoing retaliations between the US and China further complicate the situation, potentially leading to knock-on effects such as capital flight and reduced foreign investment in the US. Sherman concluded by discussing the volatility in fixed income markets, noting significant movements in yields and spreads, particularly in high-yield and investment-grade corporate bonds. He highlighted the flight to quality in government-backed securities and the relative stability of higher-quality credit markets. Sherman suggested that high-quality credit portfolios, offering yields of 6-8%, might be a safer investment compared to equities in the current environment, emphasizing the importance of duration and quality in navigating market uncertainties.