Early 2022 was a lousy time to be a fixed income investor, but after a collapse in bond valuations and amid a period of slower global growth, Citi’s CIO (Chief Investment Office) now believes current rates of US government bonds look attractive.
A swift correction is gripping equity markets. In just seven weeks, the S&P 500 has nearly hit bear market territory. Citi Global Wealth is maintaining it conservative portfolio stance with the Global Investment Committee (GIC) leaving its asset allocation unchanged at its May meeting.
Shifting 2% of medium-risk global portfolios into long-duration US Treasuries
By Citi Wealth Insights |
As CIO began to reduce its overweight to “risk assets” from a peak of 11% nearly a year ago -unwinding the comparable underweight to fixed income – the team has gradually added a sizeable investment in intermediate US Treasuries and Investment Grade Corporate Bonds. In February, CIO advised that the significant overweight could be shifted to longer-duration bonds when yields rose further. In Citi’s view, that time is now.
Lagging indicators such as employment and inventory restocking provide “inertia” for economic growth to continue this year. However, a demand slowdown is inevitable. Therefore, Citi analysts have further shifted their asset allocation to better absorb greater market volatility and less robust economic growth following a strong recovery.
Given today’s unique conditions, the GIC has further enhanced its asset allocation with the addition of tactical exposures to natural resources, oil services firms and gold that aims to add diversification and serve as a possible hedge against tail risks.
Conservative Means the Right Fixed Income Allocations & Quality
By Citi Wealth Insights |
Conservative portfolios will also shift toward quality bonds now that their yields are higher on the Fed’s sharp “about face.” Quality is an important consideration at this moment. CIO’s thematic overweight to consistent dividend growers has translated into stable returns this year.
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