There are growing signs that we have passed the peak of monetary policy impact and have seen the low in global bond yields, with the focus turning more towards the reflationary effects of fiscal policy. Divergent economic policies across the globe create different risks. In the US, where the rate cycle is more advanced, protecting against the potential impact of rising rates is paramount. Contrast that with the eurozone, where the European Central Bank (ECB)’s policy of negative interest rates has left an entrenched hunt for yield.
This is a challenging environment, but one in which funds that employ total return strategies, focusing on capital growth and income, have scope to both shelter capital during stormy conditions in the bond market, and use their wide remit to seek higher return opportunities outside of traditional sectors.