Income-based investment strategies, such as corporate bonds in faster growing markets, will help take advantage of a ‘new normal’ two-speed global economy with higher volatility, according to global investment manager PIMCO.
Curtis Mewbourne, PIMCO managing director and head of portfolio management for the New York office, predicted rising interest rates in developed markets such as Europe and the US, continued high inflation and real growth in emerging markets, and an end to the US quantitative easing policy would all contribute to an ongoing two-speed world economy.
Factors such as geopolitical risks in the Middle East and debt loads in peripheral European nations would also continue to contribute to ongoing global financial volatility, he said.
Income-focused investors will be looking for a way to invest higher in the capital structure through higher quality securities that still represent reasonable returns. It means looking for markets with high quality investments that still have reasonable yields, he said.
Corporate bonds or high quality high yield bonds that are able to benefit from that faster growth will be attractive, he said.
Investors should also focus on reducing their exposure to the US dollar, which will continue to weaken, he said.
