| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
The first quarter of 2026 was marked by significant military operations between the United States, Israel, and Iran, which began on February 28 and severely disrupted global energy markets. The closure of the Strait of Hormuz caused WTI crude oil to surge over 50% to $101.38, driving broad commodity gains and reigniting inflation fears. The Federal Reserve held rates steady at 3.50-3.75% while market expectations shifted dramatically from pricing in over two rate cuts to potentially pricing in rate hikes. Credit markets showed stress with the distressed loan ratio reaching 7.23%, the highest since December 2022, while commercial real estate delinquencies rose to 7.55%. The S&P 500 declined 4.33% for the quarter as energy was the standout sector performer, gaining 37.87%. Global equities fell broadly with European and Asian markets underperforming. DoubleLine remains cautiously optimistic about avoiding recession in 2026 but acknowledges the highly uncertain outlook dependent on the conflict's trajectory and duration.
The first quarter of 2026 was dominated by the U.S.-Iran military conflict that shut down the Strait of Hormuz, causing oil prices to surge over 50% and raising inflation concerns that shifted Federal Reserve policy expectations from rate cuts to potential hikes.
DoubleLine remains cautiously optimistic the U.S. will avoid a recession in 2026 despite obvious headwinds. The outlook for 2026 is highly uncertain and will likely be shaped by the trajectory and duration of the Middle East conflict and its impact on global oil prices, growth and inflation.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Mar 31 2026 | 2026 Q1 | - | Commercial real estate, credit, energy, Fed, inflation, Iran, oil, rates | - | Q1 2026 was dominated by the U.S.-Iran war that shut the Strait of Hormuz, spiking oil over 50% and shifting Fed expectations from cuts to potential hikes. Credit stress emerged with distressed loans hitting 7.23% while commercial real estate delinquencies rose. Energy outperformed dramatically while broader markets declined on geopolitical uncertainty and inflation fears. |
| Jan 31 2026 | 2025 Q4 | - | Commercial real estate, Credit markets, Dollar, Federal Reserve, fixed income, inflation, monetary policy, Treasury | - | 2025 delivered exceptional public market returns with S&P 500 up 17.88% and bonds gaining 7.30% despite persistent 2.7% inflation. Fed cut rates three times amid weakening labor markets while dollar fell 9.37% on policy volatility. Commercial real estate stressed with office properties declining sharply. 2026 outlook anticipates steady markets with dovish Fed chair but faces deficit and geopolitical headwinds. |
| Sep 30 2025 | 2025 Q3 | - | CMBS, Credit markets, Federal Reserve, fixed income, interest rates, Mortgage, Treasury | - | DoubleLine navigates a challenging environment as the Fed cuts rates amid labor market concerns while government shutdown risks persist. Fixed income markets delivered positive returns with Agency RMBS outperforming, but credit stress emerged in leveraged loans. The firm maintains caution given fiscal uncertainty and record valuations, advocating nuanced positioning as conflicting economic signals create complex investment dynamics. |
| Jun 30 2025 | 2025 Q2 | - | Bonds, Dollar, emerging markets, fixed income, rates, Trade Policy | - | Q2 2025 saw markets navigate trade policy uncertainty and geopolitical tensions while demonstrating resilience. Despite initial tariff-induced volatility, progress in trade negotiations and expectations of Fed rate cuts supported risk assets. The dollar weakened significantly while Treasury curves steepened on fiscal concerns. DoubleLine's fixed income strategies generally outperformed benchmarks, with the firm maintaining cautious optimism amid a complex investment landscape. |
| Apr 7 2025 | 2025 Q1 | - | CMBS, commodities, credit, Fed policy, fixed income, Mortgage, rates, Trade Policy | - | DoubleLine navigated a volatile Q1 2025 marked by tariff uncertainty and Fed policy transitions. U.S. equities underperformed while Treasuries rallied on dovish Fed signals. Credit markets showed stress with widening spreads and rising defaults. Commercial real estate delinquencies increased, particularly in office properties. Commodities outperformed led by gold's safe-haven appeal amid dollar weakness. |
| Dec 31 2024 | 2024 Q4 | - | Bonds, Federal Reserve, fixed income, inflation, interest rates, monetary policy, Trump Trade | - | DoubleLine outperformed in Q4 2024 despite negative returns as rising rates pressured bonds following Trump's election victory. The Fed cut rates but turned hawkish for 2025, projecting fewer cuts amid inflation concerns. Active positioning in floating-rate securities and shorter duration helped performance while mortgage securities detracted. The outlook involves navigating Fed policy uncertainty and Trump administration implementation. |
| Sep 30 2024 | 2024 Q3 | - | China, CMBS, Credit markets, Federal Reserve, fixed income, Mortgage, Rate Cuts, Stimulus | - | Third quarter marked Federal Reserve's easing cycle beginning with 50bp cut, driving strong fixed income and equity returns. China's stimulus package boosted Asian markets while Treasury yields fell across the curve. Commercial real estate stress persisted with rising delinquencies, but credit markets remained resilient with low defaults and strong fundamentals supporting continued performance. |
| Jul 31 2024 | 2024 Q2 | - | CLO, CMBS, credit, fixed income, high yield, Mortgage, rates | - | DoubleLine's Q2 commentary highlights Fed maintaining restrictive policy despite cooling inflation, with equity markets driven by growth outperformance while commercial real estate faces continued stress. Credit markets show mixed signals with improving loan defaults but persistent rating downgrades, as market participants remain data-dependent heading into late summer. |
| May 15 2024 | 2024 Q1 | - | CMBS, credit, Fed policy, fixed income, inflation, Mortgage, rates, Treasury | - | April delivered a reality check as persistent inflation forced markets to abandon hopes for aggressive Fed rate cuts, driving Treasury yields sharply higher and crushing fixed income returns. The S&P 500 fell 4.08% while commercial real estate stress intensified with office delinquencies hitting 7.38%. Only commodities rallied as investors grappled with higher-for-longer monetary policy. |
| Jan 31 2024 | 2023 Q4 | - | CMBS, credit, Fed policy, fixed income, Mortgage, rates, Treasury | - | Markets extended 2023 strength into January with S&P 500 hitting new highs on solid economic data and earnings. Fed held rates at 5.50% and ruled out March cuts, pushing easing expectations to May. Fixed income struggled with commercial real estate stress evident in rising office delinquencies. Key question remains Fed policy duration amid receding inflation. |
| Oct 13 2023 | 2023 Q3 | - | CMBS, commodities, credit, Fed policy, fixed income, Mortgage, rates, Treasury | - | DoubleLine highlights the Fed's higher-for-longer rate stance driving significant stress across fixed-income markets. Treasury yields surged, mortgage-backed securities underperformed severely, and commercial real estate showed continued weakness. Credit markets demonstrated resilience while commodities provided bright spots through energy strength. The potential collision between restrictive monetary policy and slowing economic growth represents a key risk ahead. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
OilWTI crude oil increased over 50% to $101.38 during March as the U.S.-Iran war shut down transit through the Strait of Hormuz, severely limiting energy exports from major producers. Energy prices surged 52.87% in March with outsized gains in crude oil and refined products reflecting acute supply shortages. |
WTI Brent Energy Supply Geopolitical |
InflationRising energy and industrial input prices increased fears that inflation could trend higher in the near term. The February headline Consumer Price Index reading came in at 2.4% year-over-year, but the Iran conflict is likely to push inflation higher. |
CPI Energy Prices Fed Expectations | |
RatesThe Federal Reserve held the federal funds rate steady at 3.50% to 3.75% range. Market pricing shifted from expecting more than two rate cuts for 2026 to pricing in the possibility of a rate hike due to inflation concerns from the energy shock. |
Fed FOMC Cuts Hikes Policy | |
Commercial Real EstateThe 30-day-plus delinquency rate for non-Agency CMBS was up 41 bps month-over-month to 7.55%. Delinquencies in the office segment were up 51 bps to 11.71%. CRE transaction volume was $30.3 billion, down 13% year-over-year. |
CMBS Delinquencies Office Transaction Volume | |
Credit StressThe share of loans trading below $80 increased to 7.23% from 6.43%, reaching the highest level since December 2022. The bank loan default rate ended at 1.44%, up from 1.23% at the start of the quarter. |
Distressed Default Loans Credit Stress | |
| 2025 Q4 |
AIArtificial intelligence enthusiasm supported large-cap growth companies and drove technology-led earnings growth. Much of today's technology-led earnings growth is supported by long-term capital investment in AI, energy, and infrastructure reflecting demographic pressures and labor scarcity. AI-related investment has been a major contributor to recent growth but is expected to slow from exceptionally fast levels. |
Artificial Intelligence Technology Investment Growth Infrastructure |
ValuationsEquity valuations remain elevated with the S&P 500 trading near 23x forward earnings, well above its long-term average of roughly 15.6x. Elevated valuations do not imply an imminent market downturn but tend to constrain longer-term returns and may increase market sensitivity to earnings disappointments. Current valuation levels suggest returns will depend more on earnings durability than further multiple expansion. |
Valuations Earnings Multiples Risk Returns | |
EarningsStrong corporate earnings drove market gains, particularly within technology and communication services. Consensus expectations cluster around low-double-digit S&P 500 earnings growth. Current valuation levels suggest returns will depend more on earnings durability and cash-flow generation than on further multiple expansion, with much of today's technology-led earnings growth supported by long-term capital investment. |
Corporate Earnings Growth Technology Cash Flow Investment | |
VolatilityMarket volatility declined meaningfully since April's tariff episode, with the VIX and MOVE indices moving back to levels associated with more stable markets. Lower volatility reflects less anxiety around trade policy and Fed policy, supporting investor confidence. However, low volatility markets can make finding attractive valuations tough, leaving markets more vulnerable to negative news. |
Volatility VIX MOVE Stability Risk | |
| 2025 Q3 |
RatesThe Federal Reserve cut the federal funds rate by 25 basis points to 4.00%-4.25% range in September, the first move since December. Fed Chair Powell noted increased risks to the labor market and the need to weigh those risks against above-trend inflation readings. The market was predicting one to two more 25-bp cuts in 2025. |
Federal Reserve Interest Rates Monetary Policy FOMC Rate Cuts |
Commercial Real EstateNon-Agency CMBS market priced $15.72 billion of deals in September. The 30-day-plus delinquency rate ticked down 6 bps to 7.23% in September. Office segment delinquencies dropped 53 bps to 11.13%. All commercial real estate property types experienced small price movements in August. |
CMBS Delinquencies Office Property Prices CRE | |
MortgageAgency RMBS returned 1.22% in September and 2.43% in the third quarter. The 30-year mortgage rate decreased 26 bps on the month and 47 bps on the quarter to 6.30%. Net issuance of Agency RMBS declined to $12.4 billion from $23.2 billion. Non-Agency RMBS performance was positive across subsectors driven by broad rally in interest rates. |
RMBS Mortgage Rates Agency Non-Agency Issuance | |
Credit StressThe last 12-month U.S. leveraged loan default rate climbed 31 basis points to 1.47%, up from 1.11% at the start of the quarter and its highest level since January 2024. CLO credit metrics showed some signs of weakness in September. The 12-month, par-weighted high yield default rate was basically flat at 0.49%. |
Default Rates Leveraged Loans CLO High Yield Credit Quality | |
InflationAugust's Consumer Price Index print came in at 2.9% year-over-year, up from 2.7% the prior month. Eurozone annual inflation came in at 2.2% in September, up from 2.0% and matching the highest reading since April. Japan inflation data moved lower to 2.7% from 3.1%, the third straight month of deceleration. |
CPI Eurozone Inflation Japan Inflation Price Stability Central Banks | |
| 2025 Q2 |
Trade PolicyThe quarter was marked by significant tariff policy uncertainty, beginning with President Trump's Liberation Day tariff announcement on April 2, followed by a 90-day pause for most countries on April 9. Progress in trade negotiations helped alleviate concerns over an all-out trade war, resulting in a relief rally for risk assets. |
Tariffs Trade negotiations Liberation Day China |
RatesThe Federal Reserve remained on hold with the federal funds rate at 4.25% to 4.50%. The market was predicting two to three rate cuts of 25 bps each in 2025, with the first projected to occur at the Fed's September meeting. The U.S. Treasury yield curve steepened across the quarter. |
Federal Reserve Rate cuts Yield curve Monetary policy | |
DollarThe U.S. dollar, as measured by the U.S. Dollar Index, fell across the quarter to 96.9 from 104.2. The dollar declined sharply as investor confidence was undermined by tariff uncertainty and concerns over U.S. debt sustainability. |
Dollar weakness Currency DXY Debt sustainability | |
Emerging marketsEmerging markets bonds posted positive returns over the quarter, supported by a rally in the short to intermediate segments of the U.S. Treasury curve. EM sovereigns experienced spread compression, outperforming corporates, while high yield debt outperformed investment grade debt. |
EM bonds Sovereigns Spread compression Latin America | |
| 2025 Q1 |
Trade PolicyTariff policy uncertainty weighed heavily on markets throughout the quarter, with mounting concerns around the White House's tariff policy causing market turbulence. Mixed messaging on U.S. plans to impose tariffs on global trading partners increased inflation expectations and contributed to policy uncertainty. |
Tariffs Trade Policy Inflation Uncertainty |
RatesThe Federal Reserve maintained the federal funds rate at 4.25-4.50% while announcing plans to reduce quantitative tightening starting April 1. Markets predicted three rate cuts of 25 bps in 2025, with the first projected between June and July FOMC meetings. |
Fed Interest Rates Monetary Policy QT FOMC | |
MortgageAgency RMBS had poor returns in March but performed well in Q1 as the Treasury curve steepened. Mortgage rates decreased with the 30-year rate falling to 6.65%. Gross issuance increased while net issuance decreased month-over-month. |
RMBS MBS Mortgage Rates Prepayments Issuance | |
Commercial Real EstateNon-Agency CMBS market priced $11.06 billion in March with conduit benchmark bonds widening significantly. The 30-day-plus delinquency rate rose to 6.65% with office segment showing particular stress at 9.76% delinquency. |
CMBS Delinquency Office Spreads CRE | |
Credit StressHigh yield spreads widened amid mixed economic data and escalating tariff concerns. Bank loan market posted its first negative return since October 2023. CLO credit fundamentals were mixed with increasing percentage of defaulted assets. |
High Yield Bank Loans CLO Defaults Spreads | |
CommoditiesBroad commodity market posted positive returns despite tariff headline volatility. Precious metals led performance with gold up 9.54%, benefiting from weaker dollar and safe-haven demand. Energy and industrial metals also posted gains. |
Gold Energy Metals Dollar Safe Haven | |
| 2024 Q4 |
RatesFederal Reserve cut rates by 100 basis points in 2024 versus market expectations of 150 basis points. The Fed made its first cut in September after maintaining rates at 5.25-5.50% since July 2023. December FOMC projections show only two 25-basis point cuts expected for 2025, down from four in September projections. |
Federal Reserve Interest Rates Monetary Policy FOMC Rate Cuts |
InflationYear-over-year inflation eased to 2.7% in November as tracked by the Consumer Price Index. The Fed's December projections show expectations for higher inflation in 2025 relative to September projections. Chair Powell noted slower pace of cuts reflects both higher inflation readings and expectation that inflation will be higher. |
Consumer Price Index CPI Price Stability Fed Target Inflation Expectations | |
Trade PolicyAfter former President Trump was re-elected, initial market reactions included stocks reaching all-time highs and Treasury yields rising. Anticipation for U.S. protectionism and tariffs led to higher economic growth projections. All eyes turn to the incoming administration's policy implementation, notably a pro-growth agenda. |
Trump Administration Tariffs Protectionism Pro-Growth Policy Implementation | |
MortgageAgency mortgage-backed securities were among the biggest detractors from fund performance due to rising interest rates. The Fund's positioning in Agency RMBS (42.35% allocation) and Non-Agency RMBS (24.51% allocation) represents a significant portion of the portfolio focused on mortgage-related securities. |
Agency MBS Non-Agency RMBS Mortgage Securities Prepayment Risk Duration Risk | |
| 2024 Q3 |
RatesFederal Reserve cut rates 50 basis points in September, beginning an easing cycle. Treasury yields fell across the curve with front-end yields declining more than longer tenors, creating a bull-steepening environment. Market participants expect additional rate cuts through 2024. |
Federal Reserve Rate Cuts Yield Curve Monetary Policy Treasury Yields |
ChinaChina announced stimulus package on September 24 to combat deflationary pressures and support economic growth. The package focuses on capital transfers to the financial system rather than traditional infrastructure spending. Chinese financial assets rallied on the news. |
Stimulus Deflation Economic Growth Financial System Manufacturing PMI | |
Commercial Real EstateCMBS delinquency rates rose to 5.70% in September with office segment particularly stressed at 8.36%. Commercial real estate transaction volume declined 15% year-over-year. Office properties in central business districts showed significant price declines of 4.44% month-over-month. |
CMBS Delinquencies Office Transaction Volume Property Prices | |
CreditInvestment grade credit delivered strong performance with spreads tightening and positive excess returns. High yield default rates remained low at 0.94% while bank loan markets showed resilience. CLO issuance continued at elevated levels with strong fundamentals. |
Investment Grade High Yield Default Rates CLO Credit Spreads | |
MortgageAgency RMBS delivered positive returns as mortgage rates declined 78 basis points quarter-over-quarter to 6.08%. Prepayment speeds adjusted with rate changes while gross issuance remained elevated. Non-agency RMBS benefited from favorable supply-demand dynamics. |
Agency RMBS Mortgage Rates Prepayments Non-Agency Issuance | |
| 2024 Q2 |
RatesFederal Reserve maintained rates unchanged since July 2023 with officials reducing median rate cut expectations from three to one for 2024. Market participants expect first rate cut at November FOMC meeting based on Bloomberg World Interest Rate Probability function. |
Federal Reserve Rate Cuts FOMC Monetary Policy Interest Rates |
InflationDespite encouraging inflation data in prior months, Fed Chair Powell stated officials were not convinced rate cuts were warranted. Eurozone inflation fell to 2.5% from 2.6% but wage and price data was stronger than expected, raising fears inflation could prove sticky. |
PCE Core Inflation Disinflationary Price Pressures Wage Growth | |
Commercial Real EstateCMBS delinquency rates increased with office segment jumping 61 bps to 7.55% and retail up 48 bps to 6.42%. CRE transaction volume was down 37% year-over-year to $19.6 billion with office properties showing significant price declines. |
CMBS Office Delinquencies Property Prices Transaction Volume | |
MortgageAgency RMBS generated positive returns as 30-year mortgage rates decreased 17 bps month-over-month to 6.86%. Gross issuance increased to $95.5 billion as seasonal turnover picked up, with prepayment speeds decreasing for first time in five months. |
MBS Mortgage Rates Prepayments Agency RMBS Issuance | |
Credit StressBank loan default rate declined to 0.92% by principal amount, its lowest level in 16 months. However, distressed ratio remained elevated at 4.42% and rating downgrades continued to outnumber upgrades for the 25th consecutive month. |
Default Rates Distressed Ratio Rating Downgrades Credit Quality Leveraged Loans | |
| 2024 Q1 |
InflationU.S. inflation surpassed consensus expectations for the third consecutive month in April, leading to a reassessment of higher-for-longer monetary policy. Market participants adjusted expectations from roughly three rate cuts to just one cut of 25 basis points in 2024. Sticky inflation and stronger economic data reduced expectations for Federal Reserve cuts. |
Inflation Monetary Policy Rate Cuts Fed Policy Economic Data |
RatesU.S. Treasury yields rose significantly in April with increases of 40 to 50 basis points across most tenors. The rising rate environment negatively impacted fixed income returns, with the Bloomberg US Aggregate Bond Index falling 2.53%. Market expectations shifted toward higher-for-longer interest rates. |
Treasury Yields Interest Rates Fixed Income Duration Yield Curve | |
MortgageAgency residential mortgage-backed securities failed to extend March's positive performance, returning negative 3.03% in April. The 30-year mortgage rate rose 38 basis points to 7.17%. Conventional 30-year prepayment speeds continued their upward trend, and gross issuance increased to $84.5 billion. |
MBS Mortgage Rates Prepayments Agency Securities Housing | |
Commercial Real EstateCommercial real estate showed continued stress with the 30-day plus delinquency rate for CMBS rising 40 basis points to 5.07%. Office segment delinquencies increased 80 basis points to 7.38%, while retail delinquencies jumped 38 basis points to 5.94%. CRE transaction volume was down 15% year-over-year. |
CMBS Delinquencies Office Retail CRE Transactions | |
Credit StressCredit markets showed signs of stress with the distressed ratio for bank loans increasing for the second consecutive month to 3.95%. The rolling three-month ratio of downgrades to upgrades rose to 1.82x from 1.64x. However, the high yield default rate declined to 1.55%. |
Distressed Ratio Downgrades Default Rates Credit Quality Bank Loans | |
| 2023 Q4 |
RatesFederal Reserve held rates steady at 5.50% for fourth consecutive meeting. Fed Chair Powell ruled out March rate cuts, with market expectations shifting to May. Treasury yields remained relatively stable except for 30-year which rose 14 bps. |
Federal Reserve Interest Rates Monetary Policy Treasury Yields Rate Cuts |
Commercial Real EstateCRE prices showed slight uptick in December but remained down 11.4% year-over-year. Office delinquency rates jumped 48 bps to 6.30%. Transaction volume was down 26.6% year-over-year despite monthly increase. |
CMBS Office Delinquency Property Prices Transaction Volume | |
MortgageAgency MBS underperformed with negative 0.46% return. 30-year mortgage rates increased 9 bps to 6.69%. Prepayment speeds were stronger than expected, particularly in higher-coupon mortgages as borrowers refinanced. |
MBS Mortgage Rates Prepayments Agency Securities Housing | |
| 2023 Q3 |
RatesThe Federal Reserve maintained a higher-for-longer stance on interest rates, with the federal funds rate held at 5.5%. Treasury yields rose significantly across the curve, with the 10-year rising 73 bps and 30-year rising 84 bps in the quarter. The Fed's September projections removed two of four projected rate cuts for 2024, reinforcing expectations that rates will remain elevated. |
Federal Reserve Treasury yields Monetary policy Interest rates FOMC |
MortgageAgency residential mortgage-backed securities underperformed significantly, returning negative 3.19% in September and negative 4.05% for the quarter. Mortgage rates increased substantially, with the 30-year commitment rate rising to 7.35%. Prepayment speeds slowed due to higher rates and housing seasonality, while gross issuance increased marginally. |
Agency RMBS Mortgage rates Prepayment speeds MBS Housing | |
Commercial Real EstateCommercial real estate prices were flat in August but down 14% year-over-year. The CMBS market saw limited issuance with $4.0 billion in September deals. Delinquency rates increased, with the 30-day-plus rate rising to 4.39%. Office properties showed particular stress with delinquency rates rising 51 bps to 5.58%. |
CMBS CRE prices Delinquency rates Office properties Real estate | |
Credit StressHigh yield credit showed resilience with positive returns for the quarter despite September weakness. The default rate remained low at 1.32% on a 12-month basis. Investment grade credit spreads widened slightly but remained contained. Bank loan markets continued their rally with the strongest quarterly return since Q4 2020. |
High yield Default rates Credit spreads Bank loans Investment grade | |
CommoditiesCommodities were among the few bright spots, finishing up 4.71% for the quarter despite September weakness. Energy was the best performer, driven by OPEC+ production cuts that pushed oil prices higher. Precious metals struggled, falling 5.51% in September as gold and silver declined. |
Energy Oil prices OPEC Precious metals Commodity indexes |
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