‘Lack of Downside Become the New Upside’

01 Aug ‘Lack of Downside Become the New Upside’

Investor Strategy News – Investors have a tendency to run from the last crisis towards the next one, just as regulators, like generals, fight the last war. What investors are running from is the bubble of securitisation, which burst in 2008, to corporate credit. Are they creating the next bubble?

Matt Toms, the head of public fixed income investments and a portfolio manager at Atlanta-based Voya Investment Management, says there are two major forces in action in the fixed interest sector globally:

  • the real economic headwinds forcing down yields, which is a real and lasting trend, and
  • quantitative easing, which Voya believes is in its “final throes”.

Toms says of the difficulties some countries will have in any further quantitative easing: “The Bank of Japan is going to try to fire its gun again, but it’s out of bullets. It will be more like a squirt gun… And the ECB will be firing bullets that look more like rubber bullets… In my opinion the [US] Fed has some real bullets left with interest rates in the upper 1 per cent level, which, believe it or not, is high. Australia is also in a reasonably good position.”

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