Asset Allocation

Despite the resilience of the American economy, investors in Treasuries and bonds harbor stiff hopes for a quick Fed pivot during the third losing year. “But we aren’t there just yet,” said Fidelity’s global fixed income CIO Steve Ellis. 

Senior loans, currently the highest-yielding bonds, witness substantial inflows in tracker funds. 

Once a rising star among investment options, private credit now faces headwinds as defaults increase and traditional banks re-enter the fray as competitors.

JP Morgan’s recent decision to incorporate India into its Emerging Market bond index has ignited institutional interest in the world’s leading emerging market government bond. However, full acceptance still has significant barriers to overcome.

Superlatives are raining down on India, which seems to have passed China as the promised country for emerging market investors. “It looks like the stars are really all aligned this time.”

High yield bonds are positioning themselves cautiously in the spotlight as recession fears recede and credit quality improves. While junk bonds perform best during periods of robust economic growth, a region that’s closely flirting with a recession is seen as having the most potential.

After a substantial rally, Artificial Intelligence (AI) stocks are still reasonably valued, according to Johannes Jacobi, an AI specialist at Allianz Global Investors. In a conversation with Investment Officer Belgium, Jacobi emphasized that from an investment perspective, the valuations remain favorable, while other sectors are yet to catch up.

High inflation is far from tamed, and profit margins are expected to deteriorate. Therefore, it is prudent to adopt a more defensive stance in portfolios, according to Christoph Schmidt, senior portfolio manager of DWS Concept Kaldemorgen, in a with Investment Officer.

As pressure mounts on investors to allocate larger portions of their portfolios to alternatives, Stuart Dunbar, a partner and director at Edinburgh-based investment manager Baillie Gifford, stresses the need for careful consideration. He highlights the limited supply of high-quality opportunities as a critical factor. “We can’t just rush into the alternatives.”

The world’s largest active bond house is warning that, despite last week’s declines, stock markets are still too optimistic about the ability of central banks to stave off a recession.

This recession, says Pimco’s global strategist Gene Frieda, is the most anticipated of all time, but it is indeed coming. He believes that the optimism in the stock market is premature: “Markets are still pricing in interest rate cuts too soon,” the strategist tells Investment Officer.