SSGA: Increasingly attractive proposition over the medium term

SSGA: Increasingly attractive proposition over the medium term

21 december 2023

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Outlook vooruitzicht (06)

Given current yield levels, slowing growth, and continued disinflation, fixed income moves into the limelight, offering attractive prospects for investors.

‘As we look towards 2024 and the prospect of a significant slowdown in economic activity, we believe sovereign fixed income — and US Treasuries in particular — offers investors an increasingly attractive proposition over the medium term,’ says State Street Global Advisors (SSGA) today. ‘As with several other asset classes, we expect recent choppiness to continue. The seemingly unrelenting strength of the US labour market, and its implications for Fed policy, has been, and may well continue to be, a source of angst. Meanwhile, favourable tailwinds are coalescing as the slowdown and the anchor of long-term demographics start to take hold.’

‘As the impressive resilience of the US economy fades in 2024, we believe that sovereign fixed income offers investors a rewarding opportunity. The US Treasury market is probably best placed to capture this prospect. The short end of several sovereign debt markets also presents a compelling yield-duration profile for those investors unwilling to embrace duration more fully. A slowing economy and advancing credit cycle will present challenges to corporate income and balance sheets. Therefore, we expect that there will be more rewarding entry levels for credit investors in the coming quarters. There are attractive spread opportunities in hard currency emerging market debt, assuming a hard landing is avoided. The picture for local currency emerging market debt is more nuanced but still offers attractive pick-up potential for eurozone investors.’

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