Industry Voice: A new era begins

clock • 3 min read

At T. Rowe Price, we expect 2018 to mark the beginning of a new era in bond investing as central banks start to withdraw their quantitative easing, with some also set to hike interest rates. Bond investors will need to cast a wider net, with an emphasis on detailed research, active security selection, and sector rotation.

key points

  • Developed market central bank tightening is set to begin in earnest in 2018, ending an almost-decade-long period of quantitative easing (QE).
  • Tightening will take place against a background of low yields (high prices), stretched valuations, the possibility of inflation and a number of ongoing geopolitical risks.
  • However, we believe growth will remain firm in many parts of the world, creating compelling opportunities in select corporate bond sectors.
  • In this environment, active management will be key.

All eyes on central banks

Fixed income markets in 2017 were driven by US politics, specifically the waxing and waning of expectations concerning Trump administration policies. The key driver in 2018 will be the extent and speed of central bank tightening, although is not yet clear how quickly individual central banks will seek to do this, nor how it will affect markets. Read the T. Rowe Price 2018 Global Market Outlook

 

 

Important Information

This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

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Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

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