John Pattullo, Co-Head of Strategic Fixed Income, provides a brief update on the team’s current thoughts on the markets and the opportunities they see going forward, while explaining the reasons for their optimism.
- We were always of the view that the world was short of growth and inflation and that bond yields would head lower. The surprise disruption of the oil price and the virus will simply exaggerate existing structural trends, creating a world of survivors (those with access to financing, though at a cost) and losers (likely smaller cap, more levered businesses).
- There has been an impressive wartime response from policymakers. In particular; we believe the US Federal Reserve’s support for the investment grade bond markets is materially positive.
- We remain optimistic on good quality, large‑cap, reasons to exist, global titans. While investment grade bond spreads have probably peaked, they remain reasonably priced on a risk‑adjusted basis and we have managed to lock in some sensible income streams for our investors in the past few weeks.