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Global bonds plunge to their lowest levels since the 2008 crisis

Dino Kurbegovic

Unprecedented losses have hit global bond markets, with drawdowns now eclipsing those experienced during the 2008 global financial crisis. 

The Bloomberg Aggregate Index, a benchmark for government and corporate debt total returns, has now fallen 11%, from a high in January 2021. 

Source: Bloomberg

The loose monetary policy that accompanied Covid and post-Covid periods, seems to be coming to an end. This could be a blow to money managers everywhere, but it also complicates the lives of the elderly population, which is heavily reliant on fixed-income investments.

Inflation scares are abundant, with the Czech Central Bankers and other notable EU financial institutions raising rates to try and fight the ragging inflation. 

Is the end nigh? 

Beleaguered global supply chains, the ongoing conflict in Ukraine, and now the meltdown in global debt markets all seem to be pointing to a horrible outcome for global money markets. 

Some experts, like CNBC’s Jim Cramer, are optimistic:

Derivative traders are also barking for turbulence after US Federal Reserve Chair, Jerome Powell stated “a half-point hike is on the table in May if needed.” This more aggressive tone towards inflation aligns with most of his recent speeches. Nevertheless, it seems that this approach has spooked equity investors. 

Institutional playbook 

Elsewhere, David Sowerby of Ancora Advisors stated that their advice to their clients from the institutional perspective is to start rebalancing slowly. Their focus should be stocks, with believable valuations, which most likely excludes the favored tech stocks. Growth vs value seems to be a hot topic amongst market participants once again.

Traditionally the death knell for equities is a recession, with the US recessions usually lasting 11 months and drawing down equities by 30%

Source: eToro

In light of the fact that macroeconomic factors are worsening, global economies are being pressured, and the world seems to be heading towards a recession. What to do in this instance?

The legendary investor Warren Buffett would advise having an equity exposure with a focus on value. Historically, companies with strong balance sheets usually manage to weather any storm that comes their way. 

In any case, Finbold has highlighted three recession-proof stocks to own amid global tensions that are worth keeping an eye on.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

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