Fixed Income in the Post-COVID World: Reimagining Core Bonds

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What the ‘next normal’ means for fixed income: reimagining core bonds

That the ‘next normal’ means for fixed income: reimagining core bonds This article explores the “next normal” for fixed income investments in the post-COVID world. After a long period of low-yield returns, high-yield fixed income is becoming more prevalent as central banks are hesitant to ease interest rates. The author suggests that investors should reassess the roles of each component of their portfolio and adjust their risk/return profile. The article highlights the return of traditional bonds as safe assets, which offer both income and diversification from equities. The article argues that the end of the “new normal” is upon us. The low-yield environment of the past encouraged investors to take more risks, but now the rising inflation has prompted central banks to lift easing policies. The article also suggests that inflation may be here to stay and that central banks’ monetary policies cannot be one-sided. The author recommends that investors do not overlook two critical elements: 1) inflation may remain above central bank targets, and 2) central banks may be extremely cautious about easing too quickly even if inflation subsides.

The Risks of the Next Normal

The article concludes that investors need to take a more cautious approach to fixed income investments in the “next normal” world. While there is hope for a return to the pre-COVID era, the author suggests that recent events show we may be right to question this narrative. The regime shift that investors are witnessing suggests that assumptions made over the past decade may no longer be applicable. In the second paragraph, the author explains that investors should not overlook the risks of a persistent inflationary environment and the shift in central banks’ monetary policies. Investors need to reassess their portfolios and adjust their risk/return profile accordingly.

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