Myerberg highlighted divergences in the economic outlooks for countries around the world. “We expect the US to see better economic performance coupled with ever-expanding deficits thus limiting a decline in longer-term interest rates,” Myerberg said in a note. “On the other hand, we continue to see a weaker economic picture in countries such as Canada, New Zealand, and within Europe.” While he expects international markets to grow below trend, the threat of US tariffs, either directly or indirectly, adds to the downside risk to growth, driving down inflation and leading to further and significant monetary easing in 2025, albeit at a slower pace than in the previous year. Japan remains the exception to this trend in developed market economies as the Bank of Japan, in his view, will continue to raise interest rates to slow upward pressure in wages and inflation.

“Trade policy and uncertainty will play a material role in driving further relative growth divergence between economies, with Germany, China, Canada, and Mexico being more sensitive than, for example, the United Kingdom and Australia,” Myerberg said.

Nicola Mai, economist and sovereign credit analyst at California-headquartered investment manager , also highlighted that the European economy, particularly Germany, is struggling with stagnant GDP and structural issues such as lagging technology, high energy prices, and intense competition from China. "Political uncertainty further exacerbates the situation, leading to tighter bank credit standards. Last but not least, increased global trade uncertainty poses a significant headwind for Europe," she said in a note.

There are also positives for the region compared with a decade ago: the ECB's ability to act as a lender of last resort, improved fiscal cooperation, and reduced Euroscepticism. Overall, Mai believes that the outlook presents significant opportunities for fixed income investors. She views European duration as attractive, particularly in the five- to 10-year part of the curve, while she tends to be underweight the long end of the curve due to increased sovereign issuance and reduced central bank support. "Having duration exposure in portfolios also offers significant upside in the event of more adverse global trade scenarios. Outside of core duration, sovereign spreads to German bunds in the region are relatively tight from a historical perspective. However, we see more stability in this space compared to a decade ago, as the ECB has asserted its role as a lender of last resort for sovereigns," Mai said.

Global Sustainable Total Return Bond Fund
Together with Chris Diaz and Colby Stilson at Brown Advisory, Myerberg is portfolio manager of the firm’s Irish-domiciled Global Sustainable Total Return Bond Fund (GBP), registered for sale in the UK and Ireland.

The $474 million fund, which was launched in 2022 to complement the firm’s US sustainable fixed income platform, has reached its three-year milestone. It aims to target a positive total return (comprising current income and capital gains) above the Bank of England’s SONIA Compounded Index over a full economic cycle, by investing in a range of sovereign bonds, investment grade corporate debt, securitised products and high-yield corporate bonds across global markets. It is not constrained by any benchmark.

The firm believes that dynamic asset allocation informed by top-down macro analysis, combined with bottom-up security selection and a differentiated sustainable investment approach, can deliver attractive risk-adjusted returns through the economic cycle while producing positive environmental and social impact.

The fund comes under Article 8 of the EU’s Sustainable Financial Disclosure Regulation (SFDR). It aims to invest in companies with measurable ESG outcomes, screening out companies and industries that could have controversial business involvement, using the firm’s qualitative ESG analysis, as well as a third-party provider. It excludes owning bonds issued by firms that defy the United Nations Global Compact Principles and imposes investment guidelines on possible controversies, including weapons, animal testing, fossil fuels, adult entertainment, alcohol, tobacco and gambling.

Fifty-four per cent of the fund is invested in developed market sovereign bonds, and 15.5 per cent in developed market investment grade corporate bonds. The fund has strong exposure to the US (25.5 per cent), the UK (22.4 per cent), the eurozone (18.4 per cent), and Australia/New Zealand (15.6 per cent). It has attracted assets from UK, European and Asian clients, including institutional investors, family offices and pension funds since its launch, the firm said.

"The Global Sustainable Total Return Bond Strategy has garnered significant interest from institutional and intermediary investors seeking a fixed income solution that not only offers robust income and risk-adjusted returns but also aligns with their sustainability goals,” Charlie van Straubenzee, head of European sales said. “Additionally, investors appreciate its bond-like characteristics, which help counterbalance equity risk in a multi-asset portfolio."