Could it Finally Be Time to Buy Bonds?

Sudden shifts in bond markets are inevitable from time to time, but government bonds can offer prtotection from falling equity markets

Mark Preskett 19 March, 2018 | 10:08AM
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No asset has divided opinion in the investor community over recent years like government bonds. For many asset allocators, the government bond market has been an asset class in the midst of giant bubble and one to avoid. For others, it has been one of the few asset classes to exhibit a negative correlation to equities and thus a necessary constituent of a multi-asset portfolio, no matter the price.

Even at a retail level, many defensive investors can be left puzzled when the bottom-line of their portfolio falls. For example, a portfolio that is traditionally structured with 20% in equities and 80% in fixed income is thought to be cautious, so investors will naturally find it hard when bond prices fall. So, where are the protective benefits and what are the Morningstar Investment Management team doing to protect investor capital?

Why Own Government Bonds?

Sudden shifts in bond markets are inevitable from time to time, although one can never be sure what the catalyst nor sustenance will be. While we cannot draw strong inferences from this price volatility, it does provide a timely reminder that bond markets are not always as defensive as some believe them to be.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Mark Preskett  is a Senior Investment Consultant & Portfolio Manager for Morningstar UK