On February 26, James Ringer, the global fixed income portfolio manager at Schroders, wrote that after the epidemic, inflation has resurfaced, forcing central banks around the world to react and interest rates to rise. Investors are now able to generate returns through investing in fixed income for the first time in modern history. Despite recent rate cuts in the United States, it is expected to remain at a high level for a longer period of time, presenting potential opportunities for investors in the fixed income field. The yield curve shows that expected rates are gradually returning to normal levels. For years, Schroders has been predicting that the U.S. economy would decline or enter a recession, but now most market commentators are forecasting positive growth in the U.S. economy by 2025. However, there are several known unknown factors causing turbulence in the investment markets. First, the election of Trump as U.S. President, whose policies may lead to persistently high inflation, may require the maintenance of high interest rates for an extended period, causing some volatility in the markets. Schroders states that due to high data volatility, interest rate volatility has also increased, mainly due to the impact of the economic restart after the COVID-19 pandemic. This makes investors more sensitive to data releases, leading to rapid changes in investment market trends. It is now seen that a single U.S. jobs report can overturn the market. The second known unknown is the level of government borrowing. For example, U.S. government debt as a percentage of GDP has reached the highest level since World War II, with forecasts for further increases in the coming decades. The U.S. is not the only country facing these issues, but it has the largest bond market globally. If debt becomes unsustainable, bond markets tend to punish borrowers. Ultimately, both the Trump administration and government debt will lead to rising borrowing costs. However, interest rates are currently on a downward trend. Inflation seems to be under control, and the yield curve has returned to normal levels. The fixed income sector is returning to normalcy. But from rising debt levels to economic policies that could cause inflation, there are still many risks. In this new world of interest rate volatility, Schroders believes that three key strategies should be adopted when investing in the fixed income market. First is diversification, which may be the most controversial view, given the situation in 2022. In that year, both bonds and stocks recorded negative returns. However, there is a clear correlation between stocks and bonds, which reflects the level of diversification. The lower the correlation, the higher the diversification. James Ringer believes that stocks and bonds may not necessarily show negative correlation, but the correlation will certainly decrease, allowing bonds to play a better role in risk diversification. Importantly, diversification can actually bring returns. Before the COVID-19 pandemic, bonds as a diversification tool did not bring returns to investors, but now they can. Compared to stocks with high P/E ratios, James Ringer believes that fixed income itself is a quite attractive investment choice. Finally, achieving excess investment performance through active management is essential. Before the COVID-19 pandemic, central banks around the world maintained zero interest rates. During the pandemic, they all took similar measures, and all economies experienced similar inflation. Therefore, it was difficult to see clear differences between economies and bond markets. However, today, the situations of various economies are vastly different, with varying inflation rates and growth rates, and central banks around the world are taking different approaches. Opportunities for excess performance can be achieved by selecting market regions and bond curve segments. While the importance of the above three situations may vary for different investors, the actual fixed income market environment is more optimistic than many news headlines suggest.