Inflation Linked Bonds: Performance and outlook
In times of high inflation, one might expect index-linked bonds (ILBs) to provide the insurance their name implies and protect returns. Instead, in 2022 ILBs were one of the worst performing asset classes, leaving many confused about their performance. As measured by the FTSE UK Actuaries series, an investment in an All Stocks inflation linked bond tracker at the start of 2022 will have dropped in value by 33.60% at the end of the year. Even worse, an investment in an Over 25 years maturity tracker would have lost over half of its value!
So why did ILBs perform so badly, and where are they headed from here?
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Asset Class Commentary April 2023
Investors’ optimism has started to wane as inflation expectations have once again changed – as an example, the latest US jobs report shows that hiring activity was three times stronger than the market expected. Big business leaders have also commented, highlighting that while the labour market is tight, they are not finding hiring as hard as expected.
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Asset Class Commentary March 2023
Investors’ optimism has started to wane as inflation expectations have once again changed – as an example, the latest US jobs report shows that hiring activity was three times stronger than the market expected. Big business leaders have also commented, highlighting that while the labour market is tight, they are not finding hiring as hard as expected.
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Asset Class Commentary February 2023
In contrast to the bleak returns of last year, nearly all asset classes are in positive territory for 2023. Investors are searching for the positives in any news, and this is being reflected in markets.
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