Viewpoints
2020 Outlook: Short Duration Government Income

Timely insights from portfolio managers and industry experts on key financial, economic and political issues.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.

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      By Andrew Szczurowski, CFAPortfolio Manager, Global Income Group, Eaton Vance Management

      Boston - As we enter 2020, the investment outlook looks much different than it's been the last two years.

      EVX_49873_Thumbnail_Szczurowski_1_680px

      We had 2018, which was the year where almost nothing made money, and then we had 2019, which was the year where pretty much everything made money.

      US labor markets have kept consumers strong

      The US Federal Reserve (Fed) ended up being very stimulative to markets, and the US consumer remained incredibly resilient in 2019. Why could the consumer stay so strong?

      Well, it's predominately because of the strong labor market. Entering the new year, we have unemployment that sits at a 50-year low; we have wages that are rising, although stubbornly.

      The situation is likely to change a bit in 2020. We shouldn't be expecting the jobs market to add 200,000 jobs per month. And we have the US presidential elections approaching later this year. So one of the investment themes we think will play out in markets is a growing uncertainty.

      Agency mortgage-backed securities may offer value

      One way we think investors can deal with uncertainty would be to go up in liquidity and credit quality at the same time.

      Of the places where investors can do that, we believe the agency mortgage-backed security (MBS) market may be one of the spaces that offers good value. This is a triple-A market, implicitly backed by the US government. So investors in agency MBS may face less credit risk.

      Bottom line: In 2020, it's not going to be the kind of market where you can just throw a dart against the wall and make money on every little trade. I think it's going to be a market where active management actually can add value once again.