Developing an Effective Credit Strategy Amid Economic Slowdown

In recent times, the fixed income market has witnessed an increased focus on credit strategies, primarily driven by changing economic conditions and evolving investor demands. You are the portfolio manager of a medium-sized fixed income investment firm. Your firm has recently been tasked with developing a new credit strategy in response to the anticipated economic slowdown, rising default rates, and increasing dispersion of credit spreads across different sectors.

Your firm holds a diversified bond portfolio that includes corporate bonds, government securities, and mortgage-backed securities (MBS). The leadership team is particularly interested in understanding how to incorporate a bottom-up research approach, focusing on individual credit selection, while also considering macroeconomic factors and overall portfolio risk.

Describe the key components of an effective credit strategy for the current economic environment, including specific approaches to credit analysis, risk management, and performance evaluation. Additionally, discuss how you would communicate these strategies to your clients, emphasizing the rationale behind the selected approach and anticipated outcomes.