Credit Peter Thiel, Blackrock’s deputy chief investment officer for fundamental fixed income, for providing an honest assessment of the outlook for fixed income. “Overall returns of the market will continue to be negative as monetary policy shifts,” he said. So one of the biggest bond investors in the world has an appropriately cautious outlook on total return. Not that there won’t be good places to invest in the bond market. It is of course a vast place. But we might infer from Thiel’s comments that the less “equity-like”, and more “bond-like” your chosen market, the less satisfactory will be the results. Developed world sovereign debt would be at the bottom of the list of places to look for value, closely followed by agencies and investment grade debt.
At least Blackrock won’t be justifying bond investments based on historic performance, or because the diversification is still useful in spite of the poor return outlook, two explanations we’ve come across from brokerage firms for recommending high grade debt.