Value is hard to find, inflation is set to rear its head and quantitative easing is tapering. That combination has led Australian asset owners to expect only moderate returns for 2018.
In the first of a series of articles on the fixed income outlook for this year, fund managers say bond investors are not pricing sufficient inflation into their expectations.
The main focus in early 2017 will be on the US, but may soon shift to concerns about Europe. Meanwhile, portfolio strategies are still being driven by ultra-low yields and high uncertainty.
Negative rates have failed to spur domestic demand, and while institutions have been driven to invest more offshore, they now face other issues, says Mark Konyn of insurer AIA.
Investors saw the latest round of stimulus in Japan as disappointing; it also highlights problems faced by other economies, says Paul Markham of UK fund house Newton.
CLSA’s global equity strategist, Chris Wood, says Kuroda has set the wrong inflation target and is impoverishing households, but suspects he will still extend quantitative easing.