A common language
Macro input into the funds comes from JPM’s rates/government bonds team, which is concerned with factors such as growth, inflation and geopolitics. Gartside says that provides “a common language” and “starting point” from which ideas can be filtered.
While threats of war, inflationary pressures, the rise of populism, uncertain central banking and Brexit are all in the melting pot as potential destabilising factors to the global economy, Gartside believes the biggest worry for bond investors would be if growth turns out to be significantly stronger than expected.
“That may sound odd but we’ve had a huge amount of quantitative easing, negative interest rates and record low interest rates.
“You can construct an argument that says it is now working and that growth is stronger. And, from a UK perspective, indeed since the Brexit vote, the economy has defied all expectations this year.
“The risk is that growth is stronger than we expect and that people look around the world knowing that a Bank of England base rate at a 0.25% is just absurd.
“Gilt yields at 1% are absurdly low and should be significantly higher. And then you get a wholesale re-pricing of, not just interest rates but bond yields significantly higher.”
