Kleinwort Hambros: Time to give government bonds another chance

Added 20th March 2017

Kleinwort Hambros chief investment officer Mouhammed Choukeir is rethinking his position on government bonds, arguing that the diversification benefits are more obvious now than they were years ago.

Kleinwort Hambros: Time to give government bonds another chance

As the equity bull market continues to mature and the dollar trade looks less appealing, Choukeir is finding some mileage in government bonds, despite their multi-decade yield lows.

“Depending on their risk style, for a multi-asset investor we would still recommend government bonds as they have arguably more diversification benefits now than they did a few years ago,” he stated.

While it is unlikely government bond yields will shoot up by 4% to 6% and that the low growth, low return landscape will change anytime soon, he thinks yields do have the potential to grind higher because of interest rate hikes.

He said: “Government bonds are at multi-year, even multi-decade, yield lows, but we are seeing a retracement of that.

"The Federal Reserve is starting to hike rates and other central banks are going to start exiting the qunatitative easing phase too.

"This is very unique because in the last 10 years all central banks would talk about was continued easing."

Still, "as an asset, it remains expensive relative to its own history,” he admitted.

On the other hand, Choukeir is not sure how much farther the risk assets rally has to go, an area which for the most part continues to look fully valued.

“We have to acknowledge we are in the second-longest bull market in equities in history,” he said.

“There is still value to be harvested and my preference is for European equities in some of the more distressed areas like financials.

"But I like equities to a lesser extent than I did a few years ago when the asset class was more attractive in terms of valuations.”

Sponsors

Overseas earners will be key amidst 2017 inflation

Sponsored by Neptune

Overseas earners will be key amidst 2017 inflation...

A by-product of sterling weakness is inflation, and we expect this to continue to gather steam over the coming months, with energy and food prices the hardest hit....

Kames Income Hub

home_research_centre

Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

AXA Distribution Fund
AXA Distribution Fund

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

Profiles

Viewpoint

Investment Strategy

Feature

Tweets

Events

PA Alternative Ucits 2017
PA Alternative Ucits 2017

Tuesday 25 April
The Langham, London

PA Europe 2017
PA Europe 2017

Thursday 11 May 2017
Furniture Makers' Hall

PA Channel Islands 2017
PA Channel Islands 2017

Wednesday 24 May
Royal Yacht Hotel, Jersey

PA UK Equity 2017
PA UK Equity 2017

Thursday 15 June
Radisson Blu Edwardian Bloomsbury Street Hotel

Sponsored Content

Investment Strategy

OTHER STORIES FROM LAST WORD...