Macquarie tells clients: don't abandon bonds completely

Macquarie tells clients: don't abandon bonds completely. Defensive assets such as bonds are an essential component of portfolios. Why? 1) Defensive assets provide diversification benefits as they are not correlated to equity markets, this is important during a cyclical downturn or a recession as portfolios gain protection and increase the ability to generate positive returns. 2) It is unlikely that most investors will be able to time their exit from growth assets as equity market falls often happen quickly and with limited warning, as happened in 2008. 3) In the current environment we believe the yield curve is already relatively steep, indicating the market is already pricing in future rate hikes and that structural themes, such as high levels of government debt and aging populations, are likely to contain major bond sell offs. We consider there to be strong diversification benefits of bonds in portfolios. Read the note: (VIEW LINK)


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