Recovery and central banks may support risk markets
The ongoing global recovery and accommodative policies of major central banks should support risk markets in the near term, according to Calvert Research and Management.
However, investors should be aware that markets could become increasingly volatile depending on the course of monetary policy taken.
“A focus on generating portfolio returns through credit risk versus duration risk is appropriate for the current environment — an environment characterized by strong economic and corporate fundamentals, talk of tapering at the Fed and a "go big" spending mentality in Washington,”
Vishal Khanduja, director of investment grade fixed- income portfolio management and trading, and Brian S. Ellis, fixed income portfolio manager, at Calvert, said in a note.
“We expect this approach, combined with the flexibility to adjust positioning within and across sectors, can benefit fixed-income portfolios in the months ahead.”
They said that due to the economic recovery and the inflation and yield implications of the significant deficit spending, investors should position for yield-curve steepening with an underweight to duration.
“While we previously favoured higher-quality corporate bonds, lower-quality segments of the credit markets now offer attractive opportunities in our view,” they said.
“There may still be room for spread compression here, particularly in select BBB- and crossover credits that are benefiting from the sustained reopening.
“In the high-yield market, we see value in some rising star candidates that could be upgraded to investment grade, as well as select BB- and B-rated credits that are attractive in a low-default environment.
“Within non-investment grade, our emphasis has remained on bank loans over bonds, in part due to their lower sensitivity to interest rates,” they concluded.
AUTHOR
Oksana Patron
Recommended for you
Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results and is enacting cost reductions to return the business to profitability by Q1 2025.
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
