Solid returns in the first quarter of 2023 will be celebrated by equity and bond investors alike. As we look ahead to the second quarter, let’s consider what may support further economic growth. The U.S. labor market continues to be one of the strongest pillars of the global economy. After avoiding an energy catastrophe this winter, the European manufacturing sector is showing renewed signs of life, as indicated by the headline S&P Global Flash Germany PMI Composite Output Index, which rose to 52.6 in March from 50.7 in February. Chinese economic activity is recovering now that Covid restrictions have been lifted:  Manufacturing PMI data shows three straight months of expansion, and Non-manufacturing PMI came in at 58.2 in March, marking the highest level in recent years (National Bureau of Statistics). Also, the easing interest rates and greater funding support for the real estate market in China are providing a boost to the housing market there.

Markets performed well in Q1 2023 despite economic threats. Yields dropped significantly during March after the fallout from Silicon Valley Bank going under. This provided a boost to growth stocks as well as fixed income. Inflation cooled slightly during the quarter, but the Fed continued to make it clear that interest rates will most likely stay at current or increased levels for longer than what the market has projected. The labor market remained tight as over 1m jobs were added to the U.S economy so far this year, however, jobless claims continued to steadily increase.

Pathstone’s “Meet the Manager” interview series features some of the passionate and committed asset managers with whom we have developed strong relationships. Our goal is to share the depth and breadth of expertise and collaboration that goes into our investment process.

This installment features Libby Cantrill, Managing Director, Public Policy, and Jerry Woytash, Vice President and Portfolio Manager, of fixed income asset manager PIMCO. PIMCO has been focused on active management in fixed income for more than 50 years. Pathstone uses the PIMCO Income Fund (PIMIX) as a core part of our credit risk alternatives asset class, aiming to generate attractive risk-adjusted returns for clients across a variety of fixed income asset classes.

In a discussion with Chris Martin, Director in Pathstone’s Investment Research team, Libby and Jerry provide their take on the current debt ceiling debate and how it might affect the market for Treasuries and other short-term instruments. Their dialogue builds upon Pathstone’s recently published analysis, Debt Ceiling Debate 2023: Our Assessment.

Please note, this interview has been edited for length.