Colin Fleury, Head of Secured Credit, shares his views on fixed income markets for the year ahead. While 2019 was generally a strong year across risk asset classes, he believes caution may be warranted in 2020. Colin expects the returns pattern seen over the last two years, when viewed as a whole, to continue — namely positive but low relative excess returns, with increasing dispersion in performance and volatility.
- Opportunities in 2020 will likely be found in consumer related asset‑backed securities, such as credit cards or mortgage pools, while corporate credit will require a more guarded approach from a risk perspective given the creeping leverage levels.
- Central banks are expected to remain accommodative; however, the Secured Credit Team will retain a cautious bias next year, both in terms of the types of companies that they look to invest in and also where in the capital structure.
- The team highlight the need to be on the lookout for anything that signals signs of compression or weakness in corporate margins, which could come as a result of a number of factors including possibly tighter labour markets, greater impact from tariffs or simply the lack of investment by companies starting to show in efficiency levels.