Financial Insights That Matter
As investors contend with Donald Trump’s recent US election victory and the potential impact of his policies on growth and inflation, a key question emerges: Is this the right time to shift from fixed-income investments to risk assets like stocks and shares?
In an interview on Yahoo Finance Future Focus, Charles Stanley Direct chief analyst Rob Morgan gave his perspective on how to approach this decision amid market volatility and shifting fiscal policies.
“There’s been a huge amount of volatility in bond markets just lately,” Morgan remarked, referencing market reactions following Trump’s election victory on 5 November. Expectations of higher fiscal spending and tariffs have driven inflation fears, a development historically unfavourable for bonds.
However, Morgan warned that the market may have already priced this in. “Bond prices have moved to reflect fewer interest rate cuts going forward,” he said. “It is a bit of a case of whether the horses are already bolted in terms of a tactical move away from bonds and into risk markets.”
Despite the recent rally in equities, Morgan argued that fixed income still holds value, particularly for income-focused and cautious investors. “The value we see in the bond market, having had that move with yields in the sort of 4.5% region for government bonds, compensates quite well for the inflationary risk,” he said.
Read more: How will Trump’s tariffs impact UK and EU trade?
Morgan highlighted the importance of assessing economic trajectories. If inflation doesn’t surge as markets anticipate, bonds could deliver both a steady income and potential capital appreciation. For this reason, he advised maintaining fixed income as a core component of balanced portfolios.
“For cautious investors, or those who are income-oriented, fixed income is a good place to be,” he said. “Less relevant for younger investors focused on share markets, but crucial for balancing assets in a portfolio.”
Morgan discussed whether current market conditions make it an opportune time to shift toward risk assets for medium- to long-term gains. “In the short term, probably not,” he said. “For those balancing portfolios, fixed income still provides stability and attractive yields, especially in uncertain times.”
This highlights the challenges of adjusting investment strategies in a volatile market. For investors, the choice depends on factors such as their risk tolerance, investment time frame, and outlook on the broader economic landscape.
Fiscal drag occurs when tax thresholds fail to rise in line with wages, pushing more earners into higher tax brackets.
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