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Next Recession Ahead? Fixed Income Investing Ideas in an Aging Expansion

By Advisor Perspectives
Wealth Management, Capital Markets, Financial Services


  • While we do not view a recession as imminent, we think investors should be prepared for the cycle to turn over the next three to five years.
  • When thinking about their fixed income allocations late in this cycle, investors should consider the risks posed by higher interest rates, an uptick in inflation and stretched valuations, among others.
  • We believe fixed income investors can seek to de-risk, diversify and differentiate their portfolios by 1) taking advantage of the flat yield curve; 2) reinforcing the core; 3) defending against inflation; 4) increasing portfolio flexibility; and 5) seeking pockets of opportunity in stretched credit markets.

Is it time for fixed income investors to start thinking about the next turn in the economic cycle?

We are now in the 10th year of the U.S. economic expansion, one that would mark the longest in modern U.S. history if it continues past July 2019. The expansion thus far has been characterized by large central bank flows and financial repression, which in turn have damped volatility and contributed to solid returns for most asset classes. A traditional 60/40 portfolio of equities and debt, for example, would have returned about 7.2% over the past decade (as proxied by the S&P 500 and the Bloomberg Barclays U.S. Aggregate Bond Index).

Read more at Advisor Perspectives.


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