It’s that time of the year again when fund managers start making predictions for the next twelve months.
Investors can get some value from these forecasts, although it would be unwise to back a single asset class rather than invest for the long-term through a well diversified portfolio.
The outlook for fixed income from Andrew Wells, Global CEO of Fixed Income at Fidelity Worldwide Investment, contained some interesting nuggets.
Despite fears of a ‘bond bubble’, Wells believes that the breadth and diversity of the fixed income asset class will continue to attract investors in 2013.
According to Wells, investors will continue to be attracted to lower volatility assets as a result of ongoing concerns about volatility in the financial markets.
He tips emerging market bonds for investors who are willing to take on a little more risk in search of higher real yields, with the prospect of currency appreciation able to enhance returns.
Wells dismisses the prospect of a bond bubble as he sees little scope for a reversal in the fundamental attractions of fixed income given the likelihood of a low-growth environment with central banks committed to easy monetary policy.
He does advocate a shorter duration stance due to the medium-term outlook for higher interest rates.
Everything Wells has to say on the outlook for fixed income in 2013 makes sense and it is hard to argue against his logic.
Assuming investors are exposed to a range of fixed income securities, from gilts to higher yielding corporate bonds, any fears of a bursting bond bubble impacting upon a well diversified portfolio should be minimal.
As we start to formulate our House View for the first quarter of the New Year, we will be taking these views and others into consideration.
Photo credit: Flickr/gynti_46
