Fixed-income markets have captured the attention of investors and analysts in recent days, as sovereign debt yields spike.
For example, the yield on the 10-year Spanish bond already exceeds 4%, a level not seen since 2013, while the 10-year U.S. bond is hovering around 4.75%, a high for the decade.
Another benchmark that has surprised investors is the 30-year US bond, which during the week was paying 5% for the first time since 2007.
These strong generalized increases in all countries, caused by a tightening of tone from central banks and higher rate expectations for a longer period of time, have in turn led to falls in equity markets, with the US indices ceding up to 2% on some days this week.
Alberto Matellán, chief economist at MAPFRE Inversión, believes that, despite the sudden movements, the debt return ranges “are consistent with the economic reality,” given current inflation levels, apparent price resistance and the fact that growth, although weak, is coming through stronger than was expected.
Matellán, rules out the need to redirect portfolio strategy for the time being, saying we need to wait until we know whether the market background has changed. “We need to reflect and think about whether this sudden movement represents a change in the market. In this case, changing strategy is not the way to go, and retail investors shouldn’t be swayed by this type of variable,” he said.
Oil registered a significant decline in recent days, even falling by 4% at one point, after being up for a few weeks. “Any investor going into oil must accept that it’s a very volatile asset,” says Matellán, who adds that the oil price fluctuations impact the earnings prospects of many companies, which is why it’s important to take the long-term trend into account.
In the face of weak growth and downward prospects, the “normal” scenario would be that crude oil remained stable and even dipped slightly, so there’s no need to “be scared of the movements” that we’re seeing right now.
The importance of trusting a specialist
Matellán is crystal clear on the role of professional money managers: they “know how to defend themselves” in these market environments, so it’s vital to put yourself, and your money, in the hands of a trusted active manager, who is aware of the movements and knows how to discern between simple corrections and significant changes in the market.