The manager of the £8.9bn Newton Real Return fund said it may be misguided to heed bullish commentators who see the US Federal Reserve’s so-called ‘tapering’ of bond purchases only as a “clear negative” for US Treasury bonds.
He said: “This policy can also be seen as a withdrawal of stimulus from an economy which has become reliant on a constant flow of cheap money. We remain broadly positive on US long bonds in the expectation that rates will not rise in a parallel fashion along a yield curve which is already very steep.”
However, he warned the US economy and profits would need to “pick up soon” if the “enthusiasm” built into share price valuations is to be validated.
