Is fixed income as an asset class no longer able to provide ballast against equity sell-offs?
With zero lower bound interest rates(ZLB), the investors fear rates will not be able to fall far enough to provide the safety expected from bonds.
In every other major recession, the Fed has had the room to decrease rates significantly without reaching zero bound.
In this environment, bonds have failed to provide its three key objectives: capital appreciation, income generation and preservation of the principle.
New approach and asset allocation needs to be adopted to provide alpha for investors. With these astonishing debt numbers, can U.S. government ever afford to raise the interest rate? Any sophisticated investor would bet that the interest rate will remain near zero for a long time to come.
