fixed income

Cashed-up retirees in the market for yield are finding that it’s increasingly being delivered by assets that aren’t on the stock market but still have a palatable risk profile.

With higher interest rates and inflation upending investment dynamics, advisers say they’ve already begun transitioning their clients toward fixed income and defensive assets following a long period when duration didn’t have much to offer.

Recent economic turmoil has had the positive effect of giving fixed-income back its traditional defensive kick, says Western Asset’s Anthony Kirkham. Investors should be ready to reallocate as needed to take advantage of the renewed diversification benefits.

Five per cent on a one-year term deposit will tempt a lot of investors, and with good reason, but equities have proven their worth over the long term. As ever, experts say, personal needs should guide investment selection.

The RBA’s sharp policy shift towards higher rates has put significant wind in the tail of “boring, old” bonds. But do Australians understand the role they play in the fixed income spectrum, and what they can do for portfolios?

Gold has never held strong investment appeal for SMSFs, despite being seen as a hedge against inflation. With the precious metal beginning a so-far volatile 2023 full of steam, SMSFs looking to preserve capital have several reasons to consider incorporating gold into their portfolios.

The traditional 60/40 portfolio mix of shares and bonds may be due a shakeup in 2023, as market participants look to add fixed-income exposure to help offset a potentially weak year for equities.

Credit and equity markets both suffered a very bad 2022, as the collapse of negative correlation between stock and bond prices left no safe haven for investors. But 2023 could be a big year for bonds, and experts say investors waiting on the sidelines risk missing out.

This year’s recalibration of bond prices now reflects the higher interest rate environment, making future returns attractive again for fixed income in 2023 as deteriorating fundamentals threaten other asset classes.

Investors are flocking to risk stocks in the hope of an early Fed pivot following a better-than-expected US inflation report. While it is too early for a pivot, according to Atchison Consultants, the longer-term outlook for fixed income is positive.