Has the time come to switch to bonds?
Investments
Posted by MoneyController on 12.08.2024
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Rising markets, the spectre of a possible recession, and the likely arrival in September of a first rate cut: is it time to lean a little more on bonds to protect your portfolio?
The high volatility in the financial markets is leading many investors to consider changing their investment strategy, at least in part. In recent weeks, in fact, the almost constant rise of the markets in the first half of the year has been followed by a phase of strong corrections and recoveries, starting with Monday 5 August's collapse of the Nikkei (over 12%), followed by a rapid recovery.
Uncertainties are growing. On the one hand, it is true that to many investors it seems increasingly likely that the Federal Reserve (Fed) will cut interest rates in September. But contrary to what one might have believed even just a few weeks ago, the US may be in a 'hard landing' rather than a 'soft landing' situation: according to some analysts, economic data suggest that it cannot be ruled out that the Fed's rate-cutting policies will come as the US economy goes into recession.
Now that 1) Japan, notably thanks to its expansive monetary policy and the weakness of the yen, no longer allows cheap money to be taken (this is referred to as a 'carry trade') and 2) the situation in the markets has become more uncertain (just look at the results of the US big tech companies), investors are looking for investment strategies to protect their portfolios.
On the online platform "Financialounge", in an article by Leo Campagna, some considerations from La Financière de l'Échiquier's market flash are reported, in particular some remarks by Enguerrand Artaz, Global allocation fund manager. Firstly, the manager recalls how important it is not to react suddenly and perhaps in an uncoordinated manner to short-term events. Secondly, he talks about the importance of the bond component in the portfolio: effective exposure to the bond market - according to the manager - can benefit a portfolio, especially in a case (such as the increasingly likely one) of a progressive cut in interest rates.
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