The fixed income market is not as hotly debated as equities or property in Australia, and investors often remain under-allocated towards this asset class.
The last few months, however, have proved once again that this component of a portfolio still has a big role to play by offering some insurance and counterbalance to riskier allocations, particularly when equity markets struggle.
So, what does the fixed income market look like, and can investors find opportunities there?
It’s just a slowdown
While some economists and experts have recently become more alert to the probability of global markets entering a recession, with JP Morgan Asset Management raising that probability of recession from zero to 10 per cent in its global fixed income outlook for the first quarter of 2019, most fund managers don’t expect an imminent crisis.
The main concerns for the market are geopolitical risks, including the possible escalation of the US/China trade war; problems in Europe and how countries would handle Brexit; and major central banks’ policies.
Anthony Kirkham, head of Western Assets Australia, an affiliate fixed income manager of Legg Mason, said that despite somewhat lower gross domestic product (GDP) numbers across main economies and a general slowdown in global growth, it was definitely too early to talk about the recession.
“It’s more just a slowdown,” he said. “We are not on the verge of the recession at this point in the...