News & Insights

If returns on global equities flatten out over the next 12 months, investors shouldn’t look to the bond universe to juice their portfolio returns. Jeffrey Elswick, director of fixed income at Frost Investment Advisors, was asked to comment on what fixed income is designed to do.

Elswick agrees that recession is not likely in the near future but warns that the global economy is likely to encounter challenges in the year ahead.

“We started saying this to clients quite a few years ago, but we feel like this macro cycle has several more years to go – at least, that’s the scenario with the highest probability,” said Elswick. “The probability of recession goes up every single year, we’re 11 years into this bull market, and we also have some near-term challenges.”

Such events are difficult, if not impossible, to predict, but there seems to be some consensus around a GDP growth rate near 2% for 2020, just barely beating inflation. Elswick said that muted economic growth probably means 2% to 2.5% returns from fixed-income investing, but more positive economic news could cause the bond universe to go negative.

Excerpted from Financial Advisor on January 21, 2020. To view full article, click here.