Economic and political challenges across major economies
With the UK due to leave the EU on 31 October, the CBI has warned that neither the UK nor the EU is ready for no deal. Europe is already grappling with its own economic and political issues, and further afield, the ongoing US-China trade war is starting to weigh meaningfully on sentiment.
Lower your volatility with higher yield bonds
Central banks have moved back to lowering rates, and although corporate bonds should partially benefit there is the potential for uncertainties to filter into corporate earnings. This impacts both equity and bond prices and in particular, the ability of investment grade bonds to provide a decent yield.
So, it is worthwhile re-assessing the potential reward relative to risk an investor should expect from bonds. Although a cautionary stance should be forefront in such unpredictable times, in an environment where recessionary concerns are muted by looser monetary policy, high yield bonds could continue to offer more attractive returns compared to their lower risk investment grade counterparts.