'The next decade is for fixed income': High yield credit predicted to outperform US equities

Despite some scepticism

The previously reliable returns provided by US equities may be facing a challenger over the coming decade, as CIOs and asset allocators back high yield credit to outperform US stocks over the coming years.

Columbia Threadneedle's global CIO William Davies and North America head of asset allocation Josh Kutin both predicted a drop in returns provided by US large cap stocks and a rise in high yield corporate bond returns.  The pair forecast that the 6.3% returns made by US large-caps over the coming five years will be eclipsed by high yield corporate bonds generating 7.5% total returns. Acknowledged as a "provocative" prediction by the Columbia Threadneedle duo, the pair said this expectation was based on the rationale that even if high yield bonds are riskier than the rest of the fixed i...