In a risky environment of rising interest rates and continually underperforming growth stocks, investors would typically flock to traditional “safe haven” asset classes such as fixed income assets.
However, with geopolitical pressures coupled with the US Federal Reserve’s (Fed) reaction to high inflation, fixed income assets may not have behaved like the classic safe havens that investors expect, says Manulife Investment Management (Manulife IM) multi-asset client portfolio manager Paul Kalogirou.
Says Kalogirou: “We are at a point now where we have had this significant drawdown in risk assets and we have had a Fed reaction to that. And the market, to some degree, has anchored itself around where they think the Fed is going to go in terms of rates at around 3.5%. The Fed is sort of going full-blown into pushing up to that level. They’re not looking to finesse or provide any soft rhetoric to the market.