Investment insights: cuts, yields and opportunities
By Kirsten Hastings, 3 May 16
With the looming threat of dividend cuts and a reversal in bond yields, coupled with the emergence of new growth patterns and value opportunities, click through the following pages to read what five wealth managers think we should be paying attention to.
Artur Baluszynski, director and head of research, Henderson Rowe, says: “After the crash of 2008, low rates have helped to improve households’ balance sheets, reduce bad debts and lift the value of assets – much needed in many western economies to stimulate credit demand. Where does this leave a fixed income investor?
“The case for some exposure to duration still holds in Europe and Japan, since both economies are bank financed and it is difficult to see how inflation can rise while banks’ balance sheets continue to shrink.
“But the bond markets in both are trading at very expensive levels and any reversal in yields could mean double digit loss.
“The high yield markets have experienced a nice rebound since the January sell-off and while we see some opportunities in the energy sector we are not buyers of any bond index products.
“Consensus has been obsessed with interest rate risk, but we have been mindful of credit risk. Do not be a hero at the bottom of the default cycle, as there will be no warning when it turns. We stick with medium-duration and higher-quality credits for now.
“While we might be accused of missing out on a good party, we think this one might not be worth the hangover.”
Tags: Canaccord Genuity Wealth Management | Cazenove | Henderson Rowe
