Position for lower rates

We believe investors should act to invest excess cash and money-market holdings as cash returns erode.

woven-fibers

Central banks around the world are cutting interest rates, and we expect the trend to continue. With returns on cash falling, investors should act to invest excess cash, money-market holdings, and expiring fixed-term deposits. A combination of bond ladders, medium-duration investment grade bonds, diversified fixed income strategies, and equity income strategies can all play a role in sustaining portfolio income.

Manage liquidity holdings

Current returns on cash could drop further as central banks push ahead with interest rate cuts. Investors holding cash or money-market funds (or those with expiring fixed-term deposits) need to manage their liquidity accordingly. For expected cash requirements over the next one to three years, we think bond ladder strategies can help investors retain attractive yields. For cash currently earmarked for longer-term spending needs, investors should consider structured investment strategies that provide exposure to market gains.

Medium-duration investment grade bonds and diversified fixed income strategies

Within fixed income, our preference is for quality bonds, particularly investment grade debt with durations between one and 10 years, and we target an average duration of around five years. Diversified fixed income strategies, such as complementing core quality bond holdings with satellite exposure to riskier credit like high yield, emerging market bonds, or loans can also help enhance portfolio yield. Separately, we continue to see value in sustainable investments into green, social, and sustainable bonds, as well as those issued by multilateral development banks.

Equity income strategies

As cash rates are eroded, we see equity income strategies—including in quality stocks with high and sustainable dividends in the Swiss and select Southeast Asian markets—as increasingly attractive alternatives to cash. Investors can also consider volatility-selling strategies to generate portfolio income.

Are you looking for more information?

Do you have follow-up questions on these topics, or are you looking for deeper insights about our views? Contact your advisor directly to continue the conversation.