Meeting the challenge of negative rates
– Stock markets responded positively to the introduction of quantitative easing. But investors have been more skeptical of negative rates, fearing that unintended consequences may overwhelm any positive effects.
– Low or negative rates are here to stay in many parts of the world. That further reduces the appeal of high grade bonds over coming years.
– Some alternative investment concepts, pioneered by institutions such as hedge funds or endowments, can be applied by private investors to help achieve their objectives in this low yield environment.
– We remove our underweight position in emerging market equities relative to Eurozone stocks. We also close an underweight position in the Japanese yen, and add an underweight position in the Australian dollar.