Janus Henderson Investors described bonds as the “light at the end of the tunnel” in 2023, paralleling Pendal’s forecasted ‘golden period of bond returns’.
The firm’s multi-asset outlook report identified that bonds would provide the defensive qualities sought out by investors, whilst in the context of a balanced investment portfolio.
Paul O’Connor, head of the UK-based multi-asset team at Janus Henderson, said investors could expect to achieve solid returns from high quality assets.
“We ended our long-standing underweight stance and now regard [bonds] as a core holding for multi-asset portfolios in 2023,” he commented.
“While the prospect of peaking interest rates and negative growth surprises is an ambiguous combination for risk assets, both trends would be positive for bond duration.”
The firm also predicted a rise in unemployment over the next few quarters, which would consequently see bonds outperforming equities and other risk assets.
O’Connor further identified that for the past two calendar years, US government bonds have delivered negative returns. He added: “In 250 years of history, we have not seen this happen three years in a row.”
The report projected that 2023 would likely be a more successful year for overall investment returns when compared to 2022, as the bear market would also transition to a bullish outlook.
Despite the hopeful forecast, O’Connor still warned of tightening monetary policy, slowing global growth, the war in Ukraine and economic instability in China.
“It is hard to avoid the conclusion that the early months of 2023 present a complicated backdrop for risk assets,” he acknowledged.
“With most of the rate hiking cycle now behind us and with asset valuations notably more attractive than where they were a year ago, 2023 should be a better year for investment returns than 2022.”
