Wealth management firm Kleinwort Hambros is “monitoring weekly” its exposure to bonds, and pondering buying more, after an extended period where it regarded the asset class as almost uninvestible, according to Thomas Gehlen, the firm’s senior market strategist.
Gehlen told FTAdviser that: “We have been reconsidering our allocations to government bonds on an almost monthly basis.
"We had moved away from them as a defensive asset in recent years, but with yields where they are now, it is something we are looking at. The valuations are more attractive than they have been for years, but at the same time the volatility has risen sharply. The recent forced selling came from nowhere, but the market has had some reassurance from central banks.”
He is however, more cautious on the outlook for investment grade corporate and high yield bonds.
Gehlen acknowledges that yields also have risen in this part of the market, but says such assets are also more economically sensitive, and he expects a recession to come to the US in the new year, and believes the UK and Europe are already in a recession.
This has made him particularly wary of investing in high yield bonds right now, as he views the asset class as unlikely to perform well during a period of such profound uncertainty.