Unprecedented market dynamics have left many scratching their heads about how to allocate to fixed income.
Summary
- Relentless geopolitical uncertainty, combined with ongoing hope of a Federal Reserve pivot, is fuelling market volatility.
- The notion of US Treasuries being a risk-free asset has become questionable, leaving fixed income investors scratching their heads as to how to allocate.
- Some have retreated to cash due to the lack of market direction – we believe this approach will prove costly on a 12-month view.
- In an investment universe totalling USD30 trillion, there are always options that outperform cash, the key is having the scope, flexibility and commitment to access them.
- Investment grade corporates are one of the primary areas where we see opportunity.
- The higher-quality end of the high yield spectrum also looks interesting; we are focusing on robust companies with strong balance sheets.
