Bonds could benefit; bullish outlook for risk assets
According to Franklin Templeton director of fixed income John Beck, the rate rise demonstrates the continued divergence in global central bank policy and the general macro-economic picture – a movement he believes could play into the hands of bond investors.
He said: “While the US continues to see growth and inflation, in Europe the picture is very different. While headline inflation is up, we are waiting to see core inflation catching up. Further, on-going uncertainties and political issues dampening growth prospects of key economies means the ECB will remain accommodative.
“In Japan, QE continues at a considered pace. We believe this divergence opens significant opportunities for international bond investors, both from a yield perspective but also in terms of currency opportunities.”
Elsewhere, Fidelity International investment director Andrea Iannelli said with a gentle path ahead for fed funds, the short-term outlook remains bullish for risky assets, including credit and US Treasuries, particularly given the very skewed positioning in the latter.
He added: “The US dollar on the other hand is likely to lose some steam as the focus shifts to the fiscal side and to other central banks.”
However, Iannelli said the longer term picture remains heavily dependent on the fiscal stance that the new US administration decides to adopt, but noted it may be difficult to pass any meaningful stimulus measure before next year.
