An Encouraging Outlook for Fixed Income Investors
After one of the worst years in decades, many fixed-income investors want to hear about what they can expect in the year ahead.
Hear from our investment specialists as they discuss what influenced the performance of fixed-income securities in 2022, their expectations for interest rates going forward, and why they anticipate a much brighter outlook for bonds in the second half of 2023.
Here are a few high-level highlights:
Blair Setford
Vice-President Product Management
IPC Portfolio Services
Our investment specialists are entering 2023 with both concern and optimism. Central bank efforts to curb inflation are beginning to take hold. The main concern for many at this point in the rate cycle is whether the Fed will make a policy error by hiking rates too far for too long. While an ongoing concern, the consensus amongst our investment specialists suggests we should expect a mild recession in the first half of 2023 that should prove to be short-lived.
Looking forward, we expect our portfolios to return to either neutral or overweight positions in equities in the second half of 2023. Fixed-income markets are looking good and will regain their ability to buffer portfolios from the excesses of the equity markets in the coming year. Investors will need to be patient as the markets continue to work through the fallout from today’s inflationary environment while remaining well-positioned for a new phase of growth beginning in the second half of 2023.
Elsa Goldberg
Franklin Templeton
Mandate: Global Fixed Income
Franklin Templeton believes 2023 will be very different from 2022 when inflation, rising interest rates, and a strong U.S. dollar dominated the fixed income story. For Elsa, 2023 looks to be a year of policy divergence where central banks across the globe catch up to the rate increases already in effect in other developed countries. With the interest rate differential between U.S. and Asia now narrowing, Elsa is excited about the opportunities that will arise out of this dynamic fixed-income environment.
Konstantin Boehmer
Mackenzie Investments
Mandate: Canadian Fixed Income
Mackenzie expects the North American economy to slow down in 2023, which will lead to central banks easing rates late in 2023. This will lay the groundwork for a strong, fixed-income environment. Konstantin is particularly excited about Canada, where markets are highly sensitive to changes in interest rates. He is also excited about the global divergence in central bank policy rates and suggests it is an opportune time to gain global exposure through access to European U.S. and Asian markets.
