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Buy protection while it's cheap

21 octobre 2015

In this issue of the LGT investor magazine "Investorama", we focus on the question why investors should keep an eye on inflation-linked bonds in the current market environment. Meanwhile we take a look at liquidity flowing in Europe. Click on "Read more" for detailed information on the latest issue of "Investorama".

 

Many investors have a globally diversified portfolio made up of nominal government bonds and stocks. Inflation-linked bonds, however, are often not weighted very heavily in such portfolios, even though they present some advantages versus nominal bonds and are cheap when inflation is low. Nominal government bonds certainly belong in a mixed portfolio, as they have a negative correlation with stocks in many scenarios. High-quality nominal government bonds can act as a safe haven. And this won’t change as long-term yields start to rise in the coming years. Government bonds that offer protection against inflation and are of a comparable quality are hard to find, however.

Liquidity flowing in Europe Europe had been putting off a comprehensive quantitative easing programme for a long time. However, the European Central Bank (ECB) is now following in the footsteps of other developed countries, showing just as much willingness to pump large amounts of liquidity into the system. This has benefitted the prospects within the eurozone, even if there is still a long way to go.

Our money tale discloses how a medieval merchant dynasty and the stock exchange are connected. Read "The number" to find out why 2 315 000 000 000 can somehow be a small number.

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