There's fixed income opportunities in the short term: Strategist
Treasury yields (^FVX, ^TNX, ^TYX) climb as concerns about geopolitical tensions grow amid an escalation in the Russia-Ukraine war. Manulife Investment Management chief investment officer and senior portfolio manager Nate Thooft sits down with Seana Smith and Brad Smith to discuss his outlook for fixed income. "The action you've seen is pretty characteristic of risk sentiment. We have this broader worry that there's a potential for higher yields because of inflationary dynamics, perhaps picking back up. There's uncertainty around future policy in the US. At the same time, it is reacting when it comes to geopolitical issues, and yields come down when there's a risk-off type of sentiment. So you're going to see more of this I think over the coming year," Thooft says. He adds, "Our general view is that the risk-reward on the belly of the curve is actually pretty good, but the longer end of the curve, we do worry that there's some upside going into the future just because we're woefully underpricing term premiums in the market. And so we think that there is opportunities in fixed income, particularly on the shorter end to the intermediate term. But the longer end, we do have some worries about higher rates in general, but at the same time, the action we're seeing in the fixed income market is pretty rational in our view when it comes to the reactions to geopolitical risk." Considering his longer-term concerns, Thooft says investors "need other diversifiers in portfolios." He also highlights commodities like gold (GC=F) and oil (CL=F, BZ=F as potential opportunities for investors. To watch more expert insights and analysis on the latest market action, check out more Morning Brief here. This post was written by Naomi Buchanan.
