Health Care Growth

Investors continue to find IG corporate bonds attractive as the market saw strong inflows, particularly in February and March, totaling approximately $30B.1 On the macro level, expectations in the first quarter played out in regard to a reflation trade as worldwide Producer Price Indices (PPIs) picked up. Europe strengthened through the quarter and the US teeters on a precipice in terms of expectations of strong growth.

Looking back at 2016, the US PPI was underscored by lack of Fed activity. We had expectations for four rate hikes through the year, but only realized one in December as underlying growth wasn’t as robust as the Fed realized or that investors assumed. This year, the Fed is anticipating three rate hikes, one of which occurred in March. We think a total of two rate hikes for the year is a more likely outcome. With that said, the yield curve continues to flatten and we expect it will flatten considerably more than it has over the last several years.

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