Over the last year and a half, fixed income investors have faced a variety of challenges: a once-in-a-generation pandemic with unprecedented lockdown, a surge in inflation and rate hikes at a pace not seen since Chairman Volcker’s tenure. With the U.S. bond market expected to continue evolving, learn about three high-conviction themes for fixed income investors to consider now.
The economic and market landscapes continue to evolve, and we expect some significant changes as we make our way through 2023. In our Economic and Market Outlook for 2023, we lay out some of the “known unknowns” we believe could significantly affect the investing landscape and dive into our thoughts covering Equities, Fixed income and Real assets and alternatives.
After looking at hundreds of asset allocations across this industry over the years, we have seen many investors own foreign stocks with no hedge. They have plenty of rationales, but the main ones are a desire to go along with the status quo, a discomfort with hedging or belief in currencies’ diversifying effect.
We strongly feel the status quo argument –that maintaining currency exposure because it is the common thing to do – is hardly a satisfactory explanation for following that path.
Though China has made great strides in recent decades, filing more patents than any other country, elevating its university system and creating tech giants that rival those in Silicon Valley, The Chinese Communist Party’s obfuscation with regard to COVID-19 may prove a catalyst for Western capital to shift assets from China’s State-Owned-Enterprises to firms that have looser ties with Beijing.
Jeff Weniger discusses how eliminating SOEs from indexes may increase sales, employee efficiency and return on equity, boosting the aggregate quality factor in a portfolio.