Summary

• The Iran war biased expectations toward weaker growth and higher inflation as the effective closure of the Strait of Hormuz disrupted the flow of global commodity supply.
• Futures markets now price multiple rate hikes this year from both the Bank of England and the European Central Bank while dialing back U.S. Federal Reserve easing expectations.
• Brent crude oil prices surged above $100 per barrel, leaving the energy sector as the standout winner in the equity space during a challenging first quarter.
• Investment grade credit spreads widened by 10 bps to 0.83%, while high yield spreads widened more sharply by 51 bps to 3.17%.
• The Northern Funds Short Bond Fund underperformed its benchmark by 2 basis points this quarter, delivering a total return of 0.26% compared to the index return of 0.28%.

The first quarter was defined less by realized macroeconomic outcomes than by a reassessment of risks. Economic momentum entering the quarter was reasonably constructive, and published consensus estimates for trend-like global growth and manageable inflation largely