Let’s be honest – there is no more important question than what happens to bonds as the world’s leading central banks start to slowly (very slowly) wind down their QE operations.
My very public view is that they won’t get very far and that interest rates won’t rise by very much.
In which case we’re stuck with a low rate environment for much longer than we all expect. If that is the case then bond prices might fall a bit but by and large, prices won’t be massively volatile – and we’ll continue to pick up our derisory yields.
But I also accept that the US Fed, in particular, may miscalculate and shove up rates quickly – and aggressively sell bonds. If that were to happen yields could jump quickly as bond prices fall. That could, in turn, be exacerbated by weaker bond market liquidity which could amplify bond price volatility. And if that were to happen we could reasonably expect the anxiety and fear to infect equity markets – many stocks are being viewed as effectively bond proxies at the moment and are thus vulnerable to a bond market sell off.
I discussed some of these issues last week in the inaugural radio podcast of the Big Call for ETF STream. You can see the link to that programme below.
If I’m honest 30 minutes of radio is barely enough time to answer any of the big questions about bonds, which is why if you are still interested in what might happen next, why not come along to an event I’m hosting in November. It’s on November 14th, in the evening, and best of all, its free but by invite only.
Details are below along with who you should contact.
David Stevenson (FT Adventurous Investor) is hosting a discussion focused on the re-emergence of inflation and a more aggressive Fed strategy. It is the first in a series of CPD certified events aimed at answering current and significant investment questions that affect asset allocation strategies and the relative merits of passive and active strategies. The panel will include Steve O’Hanlon, CIO of Rubrics Asset Management, commentator and consultant Kevin Doran, and Martin Arnold, Global FX & Commodity Strategist at ETF Securities.
The event is being held on Tuesday 14th November 2017 at The Hospital Club in Covenant Garden, London, from 6-8pm in association with fast growing financial services group, Shard Capital Partners.
Kevin, a regular commentator on BBC, Bloomberg, CNBC and other media outlets, rose through the ranks of fund management, becoming CIO at Brown Shipley before moving onto KBL as Group Head of Strategy and Research. As a response to Brexit, he left his role at KBL, bought a sail boat and spent seven months gently bobbing down the west coast of Italy, but he is now back in the UK and consulting for various companies.
Having helped set up the team in 2001, Steve also developed the group’s investment process and in 2006 launched the first Rubrics fixed income fund. Today his key role is that of lead portfolio manager of the Rubrics Global Fixed Income UCITS Fund while in addition, he oversees the continuing development of the core investment management processes and strategies of the fixed income business.
Martin has a wealth of experience in investment strategy and has a strong background in macroeconomics and financial analysis. This was gained both at the Reserve Bank of Australia and in the private commercial banking sector, covering a range of asset classes including FX, commodities, equities and bonds and during his time at ETF where he has been since 2009.
Date: Tuesday 14th November 2017
Venue: The Hospital Club, 24 Endell Street, London WC2H 9HQ
RSVP: firstname.lastname@example.org or email@example.com
Please note, places are limited so do reply early.