Time to switch gears after a decade of easy money?
GROWTH IS PICKING UP
• After a decade of record monetary stimulus from central banks, global growth seems to be picking up and the US Federal Reserve has started hiking interest rates. The central banks of Europe, England and Canada have also questioned ultra loose policies.
• When rates normalise, reaching a level more synchronised with real growth, some asset prices may re-rate as over the past ten years they have been supported by the billions of US dollars, pounds, euros and yen that central banks have poured into financial markets.
• This change may lead to greater volatility, making active asset management even more crucial as investors will still need to meet their investment goals, as well as protect their capital.
• Income-focused strategies may be suitable in such a scenario as they offer steady sources of income through coupons or dividends, and also tend to be less volatile. Some income strategies can also help protect investors against rising inflation, as some companies, such as infrastructure businesses, generally pass price increases onto their customers.