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By David RichmanNational Director, Eaton Vance Advisor Institute

As vaccinations ramp up and with global growth on the horizon, many are anticipating a cyclical rotation. We turned to Eric Stein, chief investment officer, fixed income at Eaton Vance, for insight on the potential risks and opportunities a cyclical rotation may present in the land of income.

Below are excerpts from our conversation with Eric's thesis statements in bold. Your investment theses help bring clarity to your client conversations, amp up clients' conviction in you and capture referable moments. Optimal thesis statements are timely, pithy sound bites and connect the dots to the strategies you have embraced with your clients.

David: "First, let's look at the broadest question: Do you believe the long-awaited cyclical rotation story will play out this year?"

Eric: "Yes. Assuming no exogenous shocks or COVID-19 disappointments occur, I think the cyclical rotation story will continue to play out across financial markets."

David: "If you are right, what areas of fixed income may surprise investors with downside risks?"

Eric: "Traditional, core bond portfolios with long duration are at risk due to the combination of better news on the COVID-19 front and fiscal and monetary policy for long-dated U.S. Treasury yields moving higher."

David: "What less traditional asset classes are you attracted to right now?"

Eric: "We believe that today is a perfect time for nondollar-denominated currencies. A weakening U.S. dollar led by a Fed obsessed with making the current negative real yields in the U.S. even lower will likely create opportunity."

David: "What about credit? Is part of the cyclical rotation likely to provide positive surprises in credit?"

Eric: "Absolutely! As people become comfortable with taking vacations again, COVID-19 recovery will play a role in the performance of corporate and municipal credit markets such as airports, travel and leisure companies, and energy companies."

David: "Do you think fixed-income markets are underestimating YOUR inflation expectations?"

Eric: "Yes. I think the Fed will allow the economy to overheat and inflation to run hot. The yield curve should continue to steepen and inflation expectations should continue to rise."

Bottom line: The cyclical rotation story is just as important in fixed income as it is in equity. What's your thesis?

All investing involves risk including the risk of loss.

At the Advisor Institute, our goal is not to shape your opinion or provide investment advice, rather to share this viewpoint as an example of what we believe to be a superb display of thesis articulation.