Heightened market volatility and uncertainty has once again refocused investors’ minds onto answering the question of the optimal route to constructing a well-diversified portfolio. The benefits of diversification are always sought, and while the correlation between equities and bonds turned
Edward Harrold and Jeremy Cunningham, esteemed Fixed Income Investment Directors, delve into the fascinating realm of emerging market debt (EMD) in their report titled "Local currency EMD – Why it might be time to reconsider an active allocation". At its
"Hard and local currency bonds provide different routes to returns" elucidates the distinct attributes and benefits of emerging market (EM) bonds. This asset class presents two primary investment avenues: hard currency-denominated bonds and local currency-denominated bonds. Emerging market hard currency
Essay on Unlocking Income Opportunities The main theme of the text emphasizes the burgeoning income opportunities in the fixed income sector, especially amidst the prevailing market volatility and uncertain economic environment. Elevated bond yields offer potential for higher income, acting
Global Markets and Resilient Income Streams The document, "Go global for higher income opportunities", dives deep into the increasing value of incorporating global income streams as traditional income avenues face disruptions. Edward Harrold, the Investment Director, paints a picture of
In the face of global economic unpredictability, bond investments have emerged as potential shields against market volatility. The present landscape showcases enticing opportunities in credit markets with starting yields ranging from 5.5% to 8.5%, hinting at promising long-term returns. The
In the wake of rising uncertainties, investors often gravitate towards the familiar comfort of cash. Yet historical data and current market indicators suggest that transitioning into fixed income may present a more fruitful strategy. By analyzing past rate cycles, there
Exploring the Current Investment Landscape Uncertainty reigns supreme in the current financial environment, largely influenced by geopolitical unrest, looming recessions, and fluctuating inflation rates. This atmosphere has led many investors to transition from market investments into cash-oriented assets, seeing it
"Quarterly macro and market insights from Capital Group’s fixed income team" by Capital Group sheds light on the current economic landscape. The resilience exhibited across various sectors and regions seems to be making markets less cautious about potential downside growth
Recent history's rapid interest rate increases have revealed financial system vulnerabilities, with US regional banks in the storm's eye. As central banks navigate the tightrope of monetary policy tightening and its unintended consequences, signs of peaking inflation might afford them
Is the long-term case for emerging market debt still intact? The article discusses the state of emerging market (EM) debt amid current macroeconomic conditions. Key points are the strong fundamentals in major EM countries and the undervalued exchange rates in
The piece provides an in-depth analysis of the shifting dynamics in the fixed income landscape. It highlights the dramatic shift from a low-yield environment, influenced by the predictable accommodative nature of central banks, to an era of higher expected inflation
This research paper presents updated long-term return assumptions for various asset classes in the capital market. The paper highlights the impact of valuations and high starting yields in fixed income on these assumptions, which have been raised across the board
In the report titled 'Long-term perspective on markets and economies', Capital Group elucidates on the present state of the global economy and financial markets. Transitioning from a binary market to a more balanced one, investors can no longer exclusively concentrate
In the report 'Navigating uncertainty: Are bonds in the sweet spot?' by Capital Group, the focus is on the impact of one of the fastest and steepest increases in interest rates in history, revealing weaknesses in the financial system, particularly
Capital Group's text centers around a shift in the investment landscape from a low yield environment to one marked by higher expected inflation and more cautious central banks. In this changing financial climate, investors have seen high yields in fixed
Capital Group’s research, "A multi sector approach for reliable income", presents an intriguing case on the dynamics of bond yields in today's volatile economy. In a climate of mounting inflation and economic ambiguity, higher-yielding bonds offer a promising opportunity for
In Capital Group's text, the key highlights of Q1 2023 are discussed, focusing on the resilience of Emerging Market (EM) debt despite banking sector volatility. This resilience was driven by investors paying attention to macroeconomic tailwinds from China's reopening, robust
Is the long-term case for emerging market debt still intact? In this research paper, Kirstie Spence discusses the outlook for emerging market debt and how it has been impacted by the global economic backdrop. She emphasizes that despite the current
Mike Gitlin, Capital Group’s head of fixed income, sets out the importance of investing in bond funds that deliver on their stated objective. He also explains what differentiates Capital Group from industry peers. We’ve heard you talk about the four
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
How Vulnerable is EM Debt to Volatility Spillovers? – Investment Insights This report discusses the recent shocks to the banking system and their impact on emerging market (EM) debt. The report provides insights into two types of EM debt: EM
Investing in Emerging Market Debt: Benefits of an Active Approach Emerging market debt (EMD) is becoming more popular among investors due to its increased liquidity and diversified ownership base. Despite a challenging 2022, active research-based approaches can help identify attractive
Generating income is a key role of fixed income. For investors, the durability of income streams becomes more important amid heightened volatility in both equity and bond markets. The current market environment is characterized by persistent inflation and heightened market
This is a summary of the “Quarterly macro and market insights” report from Capital Group’s fixed income team. The report indicates that the outlook for bonds remains positive despite concerns about global growth. The global economy is expected to weaken
The wisdom of crowds can be powerful. But in times of heightened uncertainty, it can be helpful to understand potential risks. At the moment, markets appear to be crystallising around a hopeful outlook for 2023. Asset prices suggest inflation will
Recessions are painful, no doubt about it. But they are necessary to clean out the excesses of prior growth periods, especially the more or less uninterrupted growth investors have enjoyed over the past decade.
As shown in the following graph, fixed income markets have experienced one of the most, if not the most, turbulent period in history. To put it in perspective, US Treasuries returned -9.1% during the first six months of 20221 ,
Five perspectives on ESG in bond investing: Views from our fixed income team Equity investors are often associated with ESG-related discussions and considerations. Bond investors can also have unique and valuable perspectives on ESG matters. Bond investors have access to
It’s a common preconception that rising interest rates are bad for bonds. While rate hikes are undoubtedly a headwind for fixed income assets, investors tend to overestimate the impact of rising rates and can overlook the benefits of holding bonds
