In the coming years, government bonds may not be the right defensive asset for protecting investment portfolios. Investors should consider and understand the characteristics of a variety of defensive assets in order to meet their objectives.
Alongside geopolitical uncertainty and record-low bond yields, today’s investors are experiencing risk related to tax cuts, increased infrastructure spending, rebounding energy prices, a tight labor market, and the shift from deflation to reflation. Investors may consider a variety of defensive assets to address the components of equity risk, bond risk and inflation risk.
Unfortunately there is no “one size fits all” option. Rather, the right approach is likely a combination of the following strategies that address the mix of risk factors underlying a portfolio today.
Alternative Equity Risk Management Approaches