PGIM's Peters Sees a Shift Into Bonds for 2023

The video discusses shifts in the bond market, emphasizing the importance of yield and starting points. It highlights the sequencing of fixed income strategies, starting with sovereign bonds and moving to credit, as a defense mechanism against potential recessions. The discussion also covers inflation trends, noting the challenges of forecasting and the potential for lower inflation in 2023. Risks related to structurally higher inflation and Fed policy are considered, with a focus on the implications for fixed income assets.

What was the impact of moving from a zero to negative interest rate policy to a more positive yield environment?

• It made it harder to earn total return.

• It caused the death of fixed income.

• It led to a bleak future for portfolios.

• It improved the outlook for balanced portfolios.

What is the first move in the sequencing of fixed income strategies?

• Shifting to equities

• Increasing cash reserves

• Investing in commodities

• Focusing on sovereign bonds

How does the sequencing of fixed income strategies rely on inflation?

• It relies on unpredictable inflation spikes.

• It requires a rapid increase in inflation.

• It depends on a gradual and linear path to lower inflation.

• It needs inflation to remain constant.

What are some of the risks associated with higher inflation?

• Increased global trade

• Labor market dynamics and deglobalization

• Lower interest rates

• Stable economic growth

What is the potential benefit of a higher Fed rate regime for fixed income assets?

• It enhances role and carry.

• It increases market volatility.

• It reduces yield and income.

• It leads to lower bond prices.