Jenna Barnard and John Pattullo, Co-Heads of Strategic Fixed Income, share their thoughts and views on bond markets in the coming year. As they see it, the key question for 2020 is whether the decline in economic growth and inflation will come to an end and whether we get an economic ‘soft’ or ‘hard’ landing. They believe the US dollar’s performance holds the key to the outcome, as it is unlikely to get reflation without a structurally softer dollar.

 Key takeaways

  • Bonds can be good diversifiers for portfolios and equity risk as they react to changes in economic growth and inflation.
  • The Strategic Fixed Income Team entered 2019 with a non-consensual view that bond yields and interest rates would stay low for a very long period of time. Though that view has not changed, the consensus has now come round to their view of the world. The key question for 2020 is whether the decline in economic growth and inflation is now coming to an end.
  • John and Jenna examine endless charts for indications of future trends. One chart that could be a key indicator of the shape of things to come in 2020 is that of the US dollar’s performance, as they believe the necessary requirement for a sustained reflation is a structurally lower dollar.