GAM’s Tim Haywood believes an absolute return approach to fixed income could prove ideal against a backdrop of rising interest rates and a reversal of QE.
Bond markets are diverse, including such assets as rates, foreign exchange (FX), convertible bonds, investment grade credit and high yield credit. Opportunities from each of these change over time, as the chart below illustrates.
Source: BofA Merrill Lynch and JP Morgan Indices via Bloomberg. All indices are based on total returns and are displayed in local currency terms, except EM Local. EM Local = JP Morgan GBI-EM Global Diversified Composite, Unhedged in USD. YTD represents performance to 30 Sep 2017
There are currently a number of reasons to be pessimistic in today's bond markets, including a sense that inflation is creeping up. This, combined with very low absolute yields and little volatility, suggests that equities might perform better than their bond equivalents.
Against a backdrop of interest rates starting to rise, fairly flat yield curves and quantitative easing (QE) either stopping, slowing or being reversed, an absolute return approach in the fixed income space is a potential solution... Read whole article here.
Important legal informationThe information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator for the current or future development.