The ECB has begun its big retreat from bond buying. It’s deftly managed to avert a taper tantrum in regional bond markets, which suggests they’ll stay an attractive place for income-seeking investors to drop anchor.
Tighter monetary policy in advanced economies. Stretched asset valuations. These are anxious times for income-oriented investors. But don’t worry—it’s still possible to generate income without taking on unnecessary risk.
High-yield bonds have had a good run. But with interest rates rising, has the market run out of road? Don’t bet on it. The sector usually motors ahead when rates rise. And when it does decline, it rebounds rapidly.
Bonds in the US high-yield market are as varied as the creatures in the sea. Invest carelessly, and you may get stung. But with careful analysis, investors can uncover gems at any stage of the credit cycle.
Should tighter monetary policy on both sides of the Atlantic worry bond investors? We don’t think so. Bonds have historically delivered positive returns when interest rates rise—particularly when they rise gradually.
Afraid you’ve missed the rally in emerging-market (EM) assets? Don’t be. Responsible policies and pragmatic politics have taken hold in many developing countries. That bodes well for growth and suggests the rally has room to run.
Political fireworks from developed economies have been front and center for most investors. But under the radar screen, there’s been a healthy turnaround in emerging markets that’s generating appealing fixed-income opportunities.
Looking for a way to increase your US exposure without adding equities? Need more income but worried about rising rates? US high-yield bonds deserve a place in your portfolio.
The index-tracking trend is firmly entrenched. But do investors recognize the big differences between stock and bond ETFs? And do they appreciate that these can cause European high-yield ETFs to lag?