The investment environment has changed. Today’s higher-rate environment offers opportunity for asset allocators to achieve goals using fixed-income instruments. It also may be possible to reduce illiquidity, complexity, and fees. We think now is the time to revisit the implementation question: how should a strategic allocation to fixed income be constructed today? Here, we discuss:
- How inflation driven by secular changes in supply chains, housing, energy initiatives, demographic shifts, and deficit spending may cause a continuation in positive stock and bond correlation.
- Volatility in aggregate-based fixed-income strategies is primarily driven by rate risk which presents a challenge in an environment of curve steepening or flatter-for-longer.
- Short-term credit’s relationship to equities and rates and its historically attractive risk/return profile may help to build a resilient fixed-income anchor.
Authors:
Joseph Graham, CFA, Senior Managing Director & Head of Investment Strategist Group, Lord Abbett
Kristen Doyle, CFA, Head of Institutional Market Strategy, Lord Abbett
This material is intended exclusively for institutional investors and their consultants, registered investment advisors, broker-dealers, and sponsors of plans with a minimum of 100 participants. It is not intended for, and should not be used with, small plan sponsors, plan participants, or the public in written or oral form or for any other purpose.