State Street is bullish on fixed income. It believes that institutions should take advantage of attractive yields and that macro conditions are improving, albeit in an uneven fashion. Investors can achieve their diversification, return, and income goals without compromising on credit quality.

Many pensions have been able to close or shrink their funding gaps due to higher yields from Treasuries and investment-grade corporate debt. At current valuations, bonds are able to more effectively function as a hedge against weaker economic growth and serve as an effective hedge against equities. 

State Street sees the economy in a sideways period for rates and inflation. Therefore, it recommends that investors get long duration and see a more favorable environment eventually emerging for borrowers. It forecasts that inflation and Fed rates will end the year lower, providing a tailwind for fixed income.

In terms of active vs. passive strategies for fixed income, State Street takes a nuanced approach. It believes that in certain sectors, capable active managers have proven to add value. But this alpha has been shown to erode over time.

State Street has built a systematic approach towards fixed income which uses a rules-based approach. It weighs factors like value, sentiment, and momentum. It sees considerable benefits to increased electronic trading for fixed income, which has resulted in more data and liquidity. 

Finsum: State Street is bullish on fixed income due to attractive yields and an improving macro environment. In terms of active vs. passive fixed income, it takes a nuanced view.  

Bonds are generally lagging behind this year, with the Bloomberg U.S. Aggregate Bond Index down by 3% year-to-date as of April 2022. Municipal bonds are similarly affected, with the ICE AMT-Free US National Municipal Index showing a 1% decline since the year's start. However, pockets of strength exist within the municipal bond space, particularly in high-yield offerings like the VanEck High Yield Muni ETF (HYD), which has seen nearly a 1% increase year-to-date. 

Despite the higher risk associated with high-yield bonds, HYD maintains a balanced risk profile, with a significant portion of its portfolio allocated to investment-grade bonds. Offering a 30-day SEC yield of 4.49%, HYD presents an attractive option for investors seeking enhanced yield opportunities, particularly those comfortable with added risk and in higher tax brackets. 

Overall, high-yield munis could serve as a credible alternative to junk corporate bonds, especially considering their relative resilience amid rising interest rates and the potential for enhanced returns compared to traditional municipal bond funds.

Finsum: Munis market is capitalizing on the current environment and investors don’t want to miss out. 

The gigantic win for spot Bitcoin ETFs with the SEC represents a significant milestone in facilitating compliant access to the leading cryptocurrency. Since January 10, inflows exceeding $10 billion have bolstered optimism for Bitcoin and the broader market outlook. For retail investors, these ETFs offer a streamlined pathway to securely backed Bitcoin, simplifying the complexities associated with managing private keys.

As institutions grapple with meeting client demand for digital asset exposure, crypto separately managed accounts (SMAs) have emerged as a complementary investment solution gaining traction among wealth managers, family offices, and registered investment advisors (RIAs). SMAs, a staple in traditional asset classes, allow for direct ownership of underlying assets and provide customizable portfolios tailored to individual client preferences and investment strategies.

 With their ability to offer regulatory compliance, security measures, and tax optimization strategies, SMAs present a compelling option alongside spot Bitcoin ETFs for navigating the evolving landscape of digital asset investments.

Finsum: SMAs are a great pathway to optimize tax structure for investors and get simplicity in a turbulent alternative space like crypto.

Amid ongoing concerns over inflation, the Federal Reserve opted to maintain its key interest rate at its highest level in over a decade, ranging between 5.25% and 5.5%. Despite solid economic expansion and strong job gains, the central bank noted a persistent lack of progress toward its 2% inflation target. Annual inflation rates remained elevated, with the consumer price index registering at 3.5%, driven primarily by surging housing and insurance costs.

Although there is optimism about reaching the 2% inflation goal, economists caution that significant progress is still needed. The Fed's strategy of keeping interest rates elevated to curb inflation has yielded mixed results, with inflation rates plateauing between 3% and 4% after initial declines. Complex factors, including rising costs passed on by insurance companies and varying consumer spending behaviors, contribute to the inflationary pressures beyond the Fed's control.

While concerns about the labor market and future business conditions persist, analysts believe the likelihood of a recession remains low. Fed Chair Jerome Powell emphasized the ongoing uncertainty, indicating a cautious approach to monetary policy adjustments in the near term.

Finsum: Expect rates to hold steadier than markets might expect with this stubborn of inflation. 

Bitcoin faced a nearly 6% downturn on Wednesday, marking its weakest monthly performance since late 2022, as investors divested from cryptocurrencies prior to the Federal Reserve's interest rate decision. The primary cryptocurrency globally witnessed a drop of nearly 16% in April, as investors cashed out gains from a scorching rally that propelled prices above $70,000.

Bitcoin saw a decline of up to 5.6%, hitting its lowest point since late February, hovering at $57,001, while ether saw more modest losses, down 3.6% at $2,857, also reaching its lowest level since February.  Despite being down 22% from March's peak, bitcoin remains up 35% this year and has doubled in value since this time last year, largely due to significant capital inflows into newly established exchange-traded funds since January. 

Crypto-related stocks, including Coinbase, Riot, and Marathon Digital, dipped in U.S. premarket trading, reflecting broader market uncertainties surrounding the Federal Open Market Committee's stance on interest rates.

Finsum: The original link between bitcoin and inflation/interest rates has deteriorated, but regulation will clear up the future for cryptocurrency.