Wellington Management -Fri, 07/28/2023 - 19:11

Insurance Multi-Asset Outlook | Core fixed income: Stop me if you’ve heard this one before

Tim Antonelli, CAIA, CFA, FRM, SCR, Head of Multi-Asset Strategy – Insurance

Head of Insurance Multi-Asset Strategy and Portfolio Manager Tim Antonelli provides his latest multi-asset views for insurers with an emphasis on the value of core fixed income in today's environment.

The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional or institutional investors only.     

Key points

  • The global economy has remained resilient, shrugging off the US banking crisis and riding on positive sentiment from generative artificial intelligence (AI) and the potential for a soft landing. However, I continue to expect tighter credit conditions and restrictive policy to take a toll on the economy, and I favor reserve-backing fixed income over surplus investments at this time.
  • My base case of recession leaves me with a slightly overweight duration stance overall and a preference for US rates in particular (excluding liability foreign exchange considerations). While I maintain an underweight view on surplus fixed income, I have a more favorable view on investment-grade corporates given declining but still-strong corporate fundamentals.
  • Japan remains my top developed equity market. Japanese companies are benefiting from inflation, monetary policy remains easy compared with other developed markets, and shareholder activism is improving corporate governance. I have lower conviction on my China overweight given the debt overhang in the property market and consumer skittishness.
  • I retain a positive view on commodities, with a focus on copper and gold. While cyclical factors could weigh on oil and metals, I expect constrained supplies to support prices.
  • Alternative assets could be primed for a strong second half of the year for asset owners who find strategies designed to capitalize on a segmented market.
  • Downside risks to my views include a severe credit crunch and recession in the US or Europe, and geopolitical risk involving China or Russia. Upside risks include a soft-landing scenario where central banks tighten policy sufficiently to quell inflation while not inducing a recession.


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