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DURATION IS NOT DEFENSIVE




Above is a chart tracking the performance of various fixed income indices before, during, and after the Global Financial Crisis in 2008. Before I continue, I want to clarify that we do not expect another financial crisis in the near future. However, we have recently adopted a defensive stance as we see a growth slowdown in the United States in the near future and asset valuations are at the upper end of their historical range. As such, it is a worthwhile exercise to study the last recession as it provides a good case study (albeit extreme) on which fixed-income subsectors tend to do well in a difficult macro-economic environment.

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