Yield advantage presents investment opportunities - IFA Magazine
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The post-pandemic inflation shock and rate-hiking cycle produced a generational reset higher in bond yields, creating a compelling multiyear outlook for fixed income as inflation recedes and risks build in other markets. Richard Clarida, Andrew Balls, and Daniel J. Ivascyn of PIMCO share their latest secular outlook identifying genuine yield advantage. They highlight three areas where investors may be overlooking risks: unsustainable U.S. debt trajectory, potential economic impacts of artificial intelligence, and stretched asset valuations. They believe that fixed income offers an attractive long-term outlook as inflation recedes, and they recommend a rethinking of the traditional 60% stocks / 40% bonds asset allocation paradigm. They also see opportunities in asset-based lending and commercial real estate debt. They expect yield curves to steepen as policy rates decline and the term premium builds, and they prioritize credit selection and liquidity in the bond market. They believe that global bond markets offer attractive and diverse opportunities for enhancing yield without significantly increasing risk. They also emphasize the importance of active investment management in constructing portfolios yielding about 6%–7% without taking on significant risk. They expect fiscal pressures to cause yield curves to steepen over the coming years, and they believe that the U.S. dollar will remain the dominant global currency. They see challenges in China's outlook and Europe's fragmented politics. Overall, they recommend a renewed focus on public fixed income markets and prioritize credit selection and liquidity in the bond market.

#Investment #FixedIncome #BondYields #Inflation #AssetAllocation #AssetbasedLending #CommercialRealEstate #YieldCurves #CreditSelection #Liquidity

https://ifamagazine.com/yield-advantage-presents-investment-opportunities/