Income & Fixed Interest Commentary - more QE to come?

“This is the start of a significant deterioration in risk assets, and while we may hit a new high in the S&P in the next few weeks it will be materially lower in the coming months.” - By Vimal Gor, Head of Income & Fixed Interest, BT Investment Management

Summary below by Anthony O'Brien

The dominant feeling among investors, according to BT’s Vimal Gore, is that the recent market downturn was an opportunity lost to get long(er).

Gore argues a significant deterioration in risk assets is imminent and that the market has clearly exited the artificially low volatility period which characterised the mid-2000s – and the last few years. He contends, therefore, that it is crucial to employ managers who can make money in this environment. “Our mantra has always been that ‘fixed income portfolios should be negatively correlated to equities in times of stress’, hopefully the last couple of months (and four years) performance highlight that this is a sensible goal to strive to”.

The recent pickup in volatility can be attributed to a number of factors including the Ebola scare, changing US monetary policy and worries about Europe and Japan. Even the Swedish Riksbank chipped in with surprise rate cut to literally zero.