Jim Cielinski, Global Head of Fixed Income, provides his perspective on some of the key macroeconomic factors that are driving fixed income markets.
- The U.S. yield curve is a good indicator of recession when accompanied by other factors such as a weak consumer, a decline in inflation, falling jobs or weak employment. However, with few of these signs present, the curve appears idiosyncratic at this juncture.
- Negative-yielding debt has soared to roughly $15 trillion worldwide. This is not merely a symptom of weak economic growth, but is also due to insufficient demand and excessive debt loads, as well as central banks falling short with their policy toolkit.
- Against this backdrop, investors may question whether bonds still have a place in their portfolios. While their income component is clearly diminished, we believe bonds still play a valid role as a source of diversification, particularly in risk-off markets.
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