A just-published report updated our fixed-income investment strategy and positioning, and recommended trimming pro-growth allocations on near-term strength.
Although the BoE has, temporarily, arrested a riot in the U.K. Gilt market, that was threatening all major government bond markets, the pressure on global bond yields remains on the upside. Growth prospects are decelerating steadily, but the inflation outlook remains worrisome, the worst in 40 years.
The global government bond bear market is now becoming more advanced, although our measure of G7 bond yield valuations shows that yields are still only at fair value, having been suppressed for much of the past decade. Thus, we remain cyclically bearish on bonds, waiting for evidence that underlying inflation pressures are on track to sustainably abate and/or the global economy is faltering.