Fixed Income

With inflation soaring and the economic recovery looking more fragile, we look at three famous central bank policy errors to demonstrate why they can be so dangerous for investors, and consider how a fixed income portfolio can be strengthened against the risk.

For our Q1 fixed income event, Mark Holman, portfolio manager at Vontobel boutique TwentyFour Asset Management, provided an update on the firm’s flagship, global unconstrained strategy, the Vontobel Fund – TwentyFour Strategic Income Fund.

Powell’s hard line may have surprised investors, particularly in light of recent market volatility and increasing geopolitical risk in Eastern Europe, but the Fed’s fear of prolonged higher inflation looks to be trumping those concerns.

A member of our Multi-Sector Bond team discusses market conditions in Q4 2021 and provides her outlook for the new year.

TwentyFour Partner and Portfolio Manager, Gordon Shannon, discusses how the short term bond strategy has performed in Q4 2021 and provides his outlook for the new year.

TwentyFour Partner and Portfolio Manager, Douglas Charleston, explains how ABS markets have performed in Q4 2021 and provides his outlook for the new year.

Inflation was the dominant theme across financial markets in 2021, and we think it is likely to be a big driver of returns again in 2022.

Given the swiftness of the Fed’s pivot we think risks are tilted towards the central bank doing more and not less. We wouldn’t even rule out a 50bp rate hike at some point.

TwentyFour’s Eoin Walsh explains how bond investors can use the three dimensions of credit – amount, quality, duration – to help maximise or protect returns through different stages of the economic cycle.

High-yield bonds can boost fixed income returns in strong markets but can create a drag for investors in downturns. Strategic income strategies give investors more options, allowing them to switch into lower risk securities to access positive returns whatever the road ahead.

As bondholders, we are comforted by all the banks passing such a severe test.

Against a backdrop of 4.20% year-on-year UK consumer price inflation (CPI), if you got your timing right, linkers (inflation-linked UK government bonds) will certainly have outperformed conventional Gilts by some margin.