Recent sharp increase in nominal and real yields has been reflected in strong movements in equity markets, causing a rotation out of growth into value stocks. We think the uncertainty (Covid, geopolitics) would continue as markets assess the path of inflation, economic growth and monetary policy.
In this environment, investors should refrain from the temptation of adding risks. Instead, they should stick to core convictions of a cautious, flexible stance on duration, moderately positive on credit and neutral on equities. Furthermore, search for yield opportunities exist in EM bonds but there is a need to be more selective across asset classes, and remain well-diversified.
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