TCW Core Fixed Income Fund

Quarterly Commentary


In the simplest terms, a lot went right for markets in 2017, as an almost “Goldilocks” scenario of open markets, ongoing global central bank accommodation (notwithstanding the Fed’s hikes and balance sheet reduction) and largely inflation-free economic growth combined to propel risk assets higher. Most U.S. macroeconomic data points were decidedly positive to end the year, reflected in improving measures of job creation, retail sales, industrial production, and capacity utilization. Further fueling animal spirits, the political apparatus in Washington finally agreed on a comprehensive tax reform bill – a long-absent fiscal achievement – providing for a substantial cut in corporate taxes as well as lower personal rates. In contrast with previous tax legislation, this new law comes at a time when unemployment is relatively low at 4%, thereby providing stimulus to an economy that is already showing momentum. To this point, the 3Q GDP print reported in December came in at 3.2%, bringing the year-over-year growth rate to 2.3%, up from 1.8% at the end of 2016. Despite this increase in economic activity, consumer price pressures remained muted, with the latest core CPI and core PCE prints coming in at 1.7% and 1.5%, respectively, well below the Fed’s nominal 2% target. Above all, volatility remained dormant throughout the year with both the VIX and MOVE Indices at all-time lows, notwithstanding many headline risks (i.e., political uncertainties, escalating North Korea rhetoric, and Fed composition changes)...

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Bloomberg Barclays U.S. Aggregate Bond Index – A market capitalization-weighted index of investment-grade, fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year.

About Securities

Securities issued by U.S. government agencies and authorities are not insured, and may not be guaranteed by the U.S. Government. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal.

Portfolio Characteristics & Holdings
It should not be assumed that an investment in the securities listed was or will be profitable. Portfolio characteristics and holdings are subject to change at any time.

This content may include estimates, projections and other "forward-looking" statements. Actual events may differ substantially from those presented. TCW/MetWest assumes no duty to update any such statements. All projections are based on current asset prices and are subject to change.

Subject to Change

Any opinions expressed are current only as of the time made and are subject to change without notice. TCW assumes no duty to update any such statements. The views expressed herein are solely those of the author and do not represent the views of TCW as a firm or of any other portfolio manager or employee of TCW.

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