Global Perspectives: Why Low Rates Are Here to Stay

To kick off our new podcast series, “Global Perspectives,” Global Head of Portfolio Construction and Strategy Adam Hetts is joined by Jenna Barnard and John Pattullo, Co-Heads of Strategic Fixed Income. In this candid conversation, the trio talks about the COVID-19 crisis, global credit, inflation trends, fool’s yield and false summits, among other topics.

Tune in to Global Perspectives, a series where our investment leaders discuss the biggest market trends and implications for investors.

Key Takeaways

  • High-quality corporate bonds have outperformed during the COVID-19 crisis, as central banks globally slashed interest rates and fixed income investors sought strong balance sheets.
  • The historic monetary and fiscal response to COVID-19 could fuel a rise in cyclical inflation. Even so, we believe central banks globally will be unwilling to hike rates, especially after a decade of undershooting inflation targets.
  • For a sustained rise in inflation, not a “false summit,” we need an inflation regime shift – the realization that orthodox economic models cannot cope with the current environment – along with long-term structural shifts in factors such as fiscal policy, productivity and demographics. Fixed income investors who remain realistic about this view and focused on the long term could be well served.

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