The new year has begun with central bankers in a tight corner when it comes scope for further action. In this issue, we explain why we expect fixed income investors to focus on central bank toolkits and policy gauges this year. We also explore the prospects for hard currency and local emerging market debt, and discuss a new US labour market index that sheds light on the relative absence of wage inflation and price pressures more broadly during this economic cycle.
This year’s most significant monetary policy developments are unlikely to be policy rate changes; instead, many central bankers will assess the tools they have – or need to craft – to manage muted growth and elusive inflation.
While hard currency debt should offer good income potential, higher defaults and valuations could limit capital appreciation. Local EMD should benefit from currency gains and local yields remaining lower for longer.
The US job market is having a bumper run, signalling that more and more people are in work. However, take closer look and not all is well: job quality has worsened, living wages are an issue. We consider the implications.
Also read out investment outlook for 2020: “Hotel California: No leaving QE”
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Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher than average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity, or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.