The need for defensive assets amid falling recession risk

lonsec fixed income recession asset allocation

10 April 2024
| By Laura Dew |
image
image
expand image

Investors should not neglect their allocations to defensive assets, with Australia poised for a soft landing, according to Lonsec.

In a podcast, chief investment officer, Nathan Lim, who joined the firm recently from Morgan Stanley, discussed how macroeconomic expectations are forecasting a soft landing, in line with Lonsec’s expectations.

For example, the US Manufacturing Purchasing Managers’ Index is above 50, Lim said, for the first time since September 2022, which represents growth or expansion within the manufacturing and services sector. 

However, the US yield curve is still inverted despite the recession risk falling.

“Every US recession since 1955 was preceded by an inverted yield curve,” Lim said. “It feels like the economy has bottomed out and is now improving, but the yield curve is still inverted and just broke the previous record by remaining inverted for more than 622 days.

“Inflation might explain some of the preference by investors for short-dated debt securities we believe the market is shying away from longer-dated Treasury securities given the US budgetary choices, specifically the lack of credible plan to reduce its debt levels.

“We believe this contrasting fiscal position will become more pronounced in time, so we continue to keep overweight Australian government bonds versus the US.”

He said Lonsec prefers Australian government bonds over US government bonds within its fixed income allocations.

Lim concluded: “Our key takeaway this month is the economy remains poised for a soft landing, so don’t neglect defensive allocations in your portfolios because even the best pilots can’t control turbulence.” 

Read more about:

AUTHOR

Add new comment

The content of this field is kept private and will not be shown publicly.
 

Recommended for you

 

MARKET INSIGHTS

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

JOHN GILLIES

I really don't know what makes these guy's tick to think they can get away with it, it's the height of stupidity! They c...

9 hours ago
Seti

The world is increasingly over US imperialism. The country built on mostly forced military global outposts post ww2 , ...

3 days 8 hours ago

adviser losses will be less severe in 2024, yes because there are next to none left. ...

3 days 12 hours ago

AustralianSuper and Australian Retirement Trust have posted the financial results for the 2022–23 financial year for their combined 5.3 million members....

10 months 3 weeks ago

A $34 billion fund has come out on top with a 13.3 per cent return in the last 12 months, beating out mega funds like Australian Retirement Trust and Aware Super. ...

10 months 1 week ago

The verdict in the class action case against AMP Financial Planning has been delivered in the Federal Court by Justice Moshinsky....

10 months 3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND