The sweet spots in bond investing this quarter
Navigating fixed income as the global economy glides towards a soft landing.
The US economy today continues to move deeper into the late stage of an economic cycle. Although volatility could rise in the near term, our return projections of the major asset classes over 10 to 15 years remain fairly stable1.
The 10- to 15-year return assumptions of US equities, which led the pack in 2018, are little changed from last year as shown in the chart. As the US market plays an instrumental role in the world’s economy, equity return assumptions at a global aggregate level are thus relatively stable.
Elsewhere in the bond universe, the long-term return assumptions improve this year, notably in the US, where policy normalisation has created a favourable entry point. In the chart above, the 10- to 15-year return assumptions of US high-yield bonds (5.5%), US investment-grade corporate bonds (4.5%) and US intermediate Treasuries (3.25%) made this year are all higher than the 2018 assumptions.
While considering adding different types of bonds to their portfolios, investors can also look at multi-asset strategies3 to provide exposure to both stocks and bonds. Multi-asset funds invest in stocks and bonds in attempt to manage risk while providing possible capital appreciation and income. This helps build a more resilient portfolio.
Look at your returns over the whole economic cycle, and consider your risk tolerance and investment horizon. Work on a disciplined investment strategy as you learn about the insights of active managers with a long-term view and global reach.