How fixed income managers are preparing for recession and more inflation

Holding bonds during recession

Going low on duration and emerging markets while branching out of traditional ‘go-to’ areas are some of the ways that fixed income managers are navigating inflation and a potential upcoming recession.

Bond markets have had a testing few months, with assets selling off in the wake of rising yields as the US 10-year Treasury yield exceeded 3% for the first time since 2018 at the tail end of April. This had a knock-on effect among equities, with growth stocks especially falling in response. Indeed, the US Nasdaq 100 index has suffered its sharpest falls since 2020, the last time this bond-equity dynamic played out. All of this has been amidst generational high inflation, which is having a widespread impact across all markets and is a major catalyst for volatility. Schroders: 'Inflati...