“There are opportunities in the bond market and there are even more in the equity market,” she said.
“I grant you, there are other people who are struggling to get above zero at the moment. But if one can adopt a more targeted approach, be really careful where they allocate their risk buckets and try and focus their clients’ hard earned cash in areas where there is a slightly higher degree of certainty, then I do believe for patient investors you can navigate through and generate a positive return.”
From Trump to bond markets
But in the short-term, the Portfolio Adviser panelists agreed that the upcoming US presidential election remains the biggest asset allocation call for the rest of the year.
“What is particularly worth considering is the inflationary effect of Trump winning because he has protectionist policies and that is unambiguously positive for inflation,” said Roe.
“If you want a Trump hedge, in a major asset class then the inflation side of TIPS seems like the most obvious solution. If you’re more esoteric, you can always go into things like Mexican pesos, although, that is not exactly a major asset class.”
Added Williams: “What worries me is that in March, the first job for the new administration in the US is to raise that debt ceiling, currently $18.1trn. They always do and when they do it generally benefits treasuries and equities tend to get hit because of the threat to growth.
“If Trump is the victor, I wonder whether he can play around a bit more by simply saying he inherited it. In which case, at the start of next year you will get the usual perception that the US is going to slow down because of government payments not being made. Looking at the macro factors, I think that is the big issue we should focus on going into next year.”
And Courtiers head of fund and asset management Caroline Shaw added the bond market is still a central macro concern for her clients.
“Our clients aren’t thinking about three months ahead, they’re looking three years, 10 years and even 15 years ahead,” said Shaw.
“So for me, the bond markets are the biggest call. We have been shorter duration than the market. My issue now is – do we go even shorter? Are we talking about going negative duration and shorting the long gilt future to do that across some of the portfolio?
“Equity markets have been relatively straightforward. The rising tide of the central banks’ QE has carried all those boats, which means it has been fairly easy to stay long equity. But now there are some bigger decisions in play around the bond market.”
