The current uncertainty around tariffs and trade policy is dominating institutional investors’ macro view of fixed income, said Alexander M. Mackey, co‐chief investment officer of fixed income at MFS Investment Management, during a session at the Canadian Investment Review’s 2025 Risk Management Conference.
To reduce the noise of the uncertainty, his day-to-day focus is dominated by five key pillars of the U.S. administration: the ongoing effect of the tariffs and trade policy, immigration, fiscal and taxes, deregulation and energy policy.
“It’s hard to not get sucked into all of the day-to-day minutiae.”
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These key pillars have significant implications for growth and inflation, added Mackey. He pointed to the markets shifting focus away from central bank actions’ administrative-driven factors as the biggest development for fixed income in 2025.
Drilling into trade policy and the impact of tariffs is difficult, he added, because of the significant unknown factors and implications for what the global economy will look like within the next 12 to 24 months or even longer.
“On the surface, we’re pretty confidant the [tariff and trade policy positions’] growth dampening — so suppressing of potential, to a degree — is going to be inflationary in some form. Whether that’s low, medium or high inflationary, we don’t know.”
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The U.S.’s current immigration policy should be growth dampening as well, said Mackey, noting deregulation is an enhancing factor for fixed income since it’s a priority of the current U.S. administration by reducing the cost of doing business.
It’s easy to understand why the U.S. Federal Reserve is currently sitting on the sidelines while other central banks are being more proactive, he noted. “It’s incredibly difficult [for the Fed] to adjust monetary policy in the face of all of these other policy-maker driven decisions that will have major implications for both growth and inflation and those are the things that matter most to the Fed.”
So far, the relative lack of volatility in the public markets is creating challenges for investors, said Mackey, particularly in fixed income since it isn’t as liquid as equities to allow the ability to deploy capital when volatility presents itself.
“The ability to get invested quickly is more challenging. You have to be prepared for it, but then secondarily, you’ve got to have that implementation plan.”
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