Rates uncertainty and market volatility remain in focus for investors in credit as central banks move more aggressively on their tightening path. Global Head of Fixed Income Jim Cielinski explains why he believes investors should avoid getting tied to expectations and instead focus on identifying the signposts that indicate whether to add or reduce credit risk in their portfolios.
- Central banks globally are laser focused on fighting inflation at almost any cost. As liquidity wanes, access to capital markets weakens but real rates remain low.
- Policy is at risk of overshooting and recession tends to be triggered this way.
- In our view, investors should be wary of reducing risk too early based on recession fears and should not overlook the chance of a dovish pivot further down the line.