The past two years have been exceptionally challenging for all investors. Spiralling inflation has led to one of the most aggressive rate-hiking cycles on record, however, we believe the market for bonds is now looking much healthier.
While bonds are once again finding their form, investors have found themselves sitting on high cash balances or short term government bonds, and one of the most consistent questions that we get from investors now is whether this is the best strategy to hit their financial targets. We think the answer is a clear ‘no’ - clients have adopted this strategy because of recent financial market performance. The negative returns across all asset classes have created a mentality of fear. As a result, holding high cash balances means they will not recover from the drawdowns experienced in the last 18 months anywhere near as quickly as they could, and in an environment where we look to have reached terminal rates, we don't believe this strategy makes sense. The opportunity cost right now of having no duration, and therefore no chance of future capital gains, could be doing a disservice to clients.
Ben Hayward, Partner & Chief Executive, discusses why we believe staying in cash could cost you and why investors with a medium term view can take confidence from investing in fixed income given today’s high starting yields.
The update was followed by a Q&A session.