An upcoming global recession is an opportunity for investors to re-position their portfolios towards investment-grade and high yield bonds, according to John Husselbee, head of multi-asset at Liontrust.
With the repricing witnessed within bonds and equities in 2022, Husselbee believes there are investment opportunities over the medium and longer term and he is not expecting a repeat of the large downward moves seen last year.
“I am more positive, albeit cautious, for the year ahead,” he said. “Within bonds, the repricing that has taken place not only in sovereign and global government bonds, but also within credit and spreads, has basically made investment grade and high yield cheaper again.”
While cognisant about default risk within the high yield space, Husselbee argued a scenario of a soft-landing economic slowdown bodes well for high yield debt.
“When you see a recession coming along, you should really be starting to basically position your portfolios towards investment grade and credit to get the benefits,” he said.
Meanwhile, looking beyond bonds Husselbee said the team is also assessing its equity positioning.
“After a decade of the US outperforming, it has left behind opportunities elsewhere, particularly in Asia and emerging markets,” he said. “Japan also looks interesting and not forgetting the UK as well.