During the fourth quarter of 2016, a sharp increase in global bond yields was accompanied by a strong rotation in equities, as investors transferred money away from defensive stocks towards more cyclical areas. At the same time, global inflation has accelerated, with a sharp rise in yields over the fourth quarter of 2016 providing a wake-up call for bond investors.
This is happening at a time when the new U.S. administration is expected to shift policy away from monetary stimulus towards fiscal measures, with signs of a similar policy switch beginning to take place in the UK and Europe as well.
As we enter what could prove to be a step change for global bond markets, are investment managers in a position to confidently model the impact of future market changes on their fixed income portfolios?
In December 2016, in association with Risk.net, we conducted a global poll of investment managers and found that 47.5% of respondents believed their firms suffered from a lack of data on certain fixed income segments such as high-yield and municipal bonds. A substantial majority (62.5%) of respondents also described their ability to model how future market changes could impact fixed-income portfolios as either “very poor,” “poor,” or “fair.”
Against the backdrop of increasing complexity in the bond market, this lack of confidence in the tools available to portfolio managers is alarming. Understand how to identify and fix these resource gaps and learn about other trends uncovered by our survey in our exclusive eBook: The Financial Paradigm Shift.