Please select your language preference on the right hand side

Languages - Canada

  • English
  • Français
Back
Regions
Language
  • English
  • Français
Skip to signin Skip to main content Skip to footer
Sun Life Global Investments logo
  • CANADA | EN
  • Investments
    • Overview
    • Sun Life Granite Solutions
    • Sun Life Multi-Strategy Solutions
    • Sustainability-focused investing
  • Team & approach
    • Investment Team & Resources
    • Core Beliefs
    • ESG integration
  • News & insights
    • All
    • Insights
    • In the media
    • News & announcements
    • OnTarget
  • Sustainability
    • Commitment
    • Responsible investing
    • Climate action
    • Diversity, equity & inclusion
    • Governance & engagement
  • About us
    • Overview
    • Institutional Business Team
Sign in
Skip to signin Skip to main content Skip to footer
sunlife logo
Sign in
  • Investment solutions
    • Back
    • Investment solutions
    • Investment solutions Overview
    • Sun Life Granite Solutions
    • Sun Life Multi-Strategy Solutions
    • Sustainability-focused Investing
    • Sun Life MFS Diversified Income Fund
  • Team and approach
    • Back
    • Team and approach
    • Team and approach Overview
    • Investment Team & Resources
    • Core Beliefs
    • ESG Integration
      • Back
      • ESG Integration Overview
      • A deeper look at ESG integration
    • ESG Commitment
  • News & insights
    • Back
    • News & insights
    • News & insights Overview
    • Thank you
    • Insights
      • Back
      • Insights Overview
      • Federal Election 2021
      • How to apply an ESG lens to manager selection & oversight
      • Fixed income still matters. And the bonds you pick matter even more.
      • Challenges & Opportunities
      • Key takeaways: Weaponizing Energy in the Russia-Ukraine Conflict
      • Rising inflation can harm portfolios, but real assets can help mitigate the pain
      • Engagement versus divestment
      • Federal Budget 2022
      • Opportunities in sustainable infrastructure
      • The Fed’s race to ‘neutral’ and beyond
      • Q2 2022 | Market Update
      • Q3 2021 | Market Update
      • Q3 2021 Sun Life Granite Managed Solutions
      • Q4 2021 | Market Update
      • Q4 2021 | Sun Life Granite Managed Solutions
      • Q1 2022 | Market Update
      • Q2 2022 | Market Update
      • Fed's single largest interest hike since 1994 challenges an already volatile market
      • Another super-sized rate hike from the Fed; what will happen to riskier bonds?
      • U.S. Fed intensifies the fight against inflation with back-to-back rate hikes
      • Volatile bonds face their first bear market in a generation
      • A deeper look at ESG integration
      • Inflation, slowing economic growth, and uncertainty
      • Climate change affects us all
      • As the Bank of Canada slows the pace of rate hikes, high quality bonds may offer a haven
      • Will market volatility continue?
      • Has inflation peaked and what now?
      • Housing and jobs data point to a looming recession
      • The demise of RRBs in Canada
      • 2023 corporate earnings may be in trouble as consumers lose confidence and inflation fades
      • Bonds: the worst is behind us
    • In the media
      • Back
      • In the media Overview
      • Chhad Aul on tactical asset allocation
      • Demand for oil will decrease however Russia could continue to weaponize it Chhad Aul
      • Why its too soon to get excited for early-2023 rate cuts Chhad Aul
      • Moving to normal size Bank of Canada interest rate hikes
      • Is the investment industry making headway on its ESG journey?
      • How to position portfolios if inflation is turning the corner
      • A look at target-date fund managers’ varying approaches to ESG investing
      • Oricia Smith named among Canada’s Most Powerful Women: Top 100 Award Winners
      • How do central banks pause without looking overly dovish?
      • How can the investment industry achieve ESG clarity?
      • Still cautious on equities but finding opportunities in Canadian government bonds
      • Market sentiment is optimistic, highquality bonds are a good hedge during recessions: Strategist
      • We prefer the U.S. for some sectors, while looking at Canada for others: Strategist
      • To keep inflation in check, overtightening may be necessary, invest in bonds: Strategist
      • Don’t neglect bonds this year despite tough 2022, PMs say
      • Oricia Smith – Changing the face of asset management
      • We continue to stay away from cyclical stocks: Strategist
      • Why this portfolio manager is proceeding with caution
    • News and announcements
      • Back
      • News and announcements Overview
      • Jacques Goulet, President of Sun Life Canada, named CEO of the Year
      • Sun Life announces establishment of SLC Management
      • Exposure change within Sun Life Multi-Strategy Bond Fund
      • Oricia Smith appointed President, SLGI Asset Management Inc. and Senior Vice-President, Investment Solutions, Sun Life Canada.
      • Sun Life Global Investments expands investment management team with a focus on multi-asset solutions and responsible investing
      • Sun Life Global Investments joins the Net Zero Asset Managers initiative
      • Markets evolve So do our Granite portfolios
      • Our commitment to achieving net-zero greenhouse gas emissions by 2050 or sooner
    • OnTarget
    • Q3 2022 | Market Update
  • About us
    • Back
    • About us
    • About us Overview
    • Institutional Business Team
  • signin
    • Back
    • signin
    • signin Overview
    • slgiinst
      • Back
      • slgiinst Overview
      • Sign in
  • Sustainability commitment
    • Back
    • Sustainability commitment
    • Sustainability commitment Overview
    • Responsible Investing
    • Governance & engagement
    • Climate Action
      • Back
      • Climate Action Overview
      • Climate Action Q&A
    • Diversity, Equity & Inclusion
  • CANADA | EN

    Please select your language preference on the right hand side

    Languages - Canada

    • English
    • Français
    Back
    Regions
    Language
    • English
    • Français
  1. Home
  2. News & insights
  3. Insights
  4. Bonds: the worst is behind us
Share this:
  • Share this on Facebook
  • Share this on Twitter
  • Share this on Linkedin

Insights

December 21, 2022

Bonds: the worst is behind us

After a horrendous 2022, bonds look poised for a better year in 2023. We think high quality bonds and their income potential could help portfolios overcome volatility in the year ahead.

Bonds: the worst is behind us

By Jason Zhang, Portfolio Manager, SLGI Asset Management, Inc.

 

2022 has not been kind to bond investors, but we see a few important silver linings after the volatile ride. Following the sharp rise in interest rates over the year, valuation of bonds has improved significantly. Investors who were starved of yields for years should welcome the change, as they no longer must own long duration bonds or lower credit quality bonds to earn a decent yield. Given the looming economic challenges, we think income can play a pivotal role in an investment portfolio as higher-quality bonds have turned advantageous.

We believe that long-term interest rates are in the process of peaking, and that there is limited downside to high-quality bonds. We see increasing signs of inflation moderating as global economies slow due to rapid interest rate hikes around the world. We believe that most of the painful monetary tightening exercises and falling bond prices are behind us. Central banks will soon be able to pause interest rate hikes and assess how quickly inflation can return to their targeted levels. Importantly, we think that central banks will have the flexibility to respond in measured steps to a possible economic slowdown. We also think a return to the ultra-stimulative policies of the post global financial crisis era is highly unlikely. This is all good news for high-quality bond investors.

To be clear, bond yields will not decline in a straight line. We expect some volatility along the way because one of the key tools to fight inflation – higher interest rates – also slows consumer spending, corporate investments and hiring. This ultimately dampens demand for goods and services and brings down price pressures in the economy. However, in a volatile market, when asset prices recover and bond yields decline too much, inflationary pressures could rebuild. This pickup in inflation could then causes bond yields to increase again.

From an asset allocation perspective, the reallocation between stocks and bonds is a key tactical decision in 2023. We like the idea of adding bond exposure in the coming months, at better entry points. We think overweighting high-quality bonds initially makes sense. Investors will be rewarded for their patience in waiting to add equity exposure as we believe corporate earnings could be revised downwards, a necessary condition to make stocks a better bargain.

The views expressed in this article are those of the authors and are subject to change at any time. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any mutual funds managed by SLGI Asset Management Inc. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. Information contained in this article has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy.

All investment solutions are offered as segregated funds for group retirement plans exclusively by Sun Life Assurance Company of Canada, through Sun Life Group Retirement Services, a member of the Sun Life group of companies.

 

Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada, and Sun Life Financial Trust Inc. 

SLGI Asset Management Inc. is the investment manager of the Sun Life Mutual Funds, Sun Life Granite Managed Solutions and Sun Life Private Investment Pools.

© SLGI Asset Management Inc. and its licensors, 2023. SLGI Asset Management Inc. is a member of the Sun Life group of companies. All rights reserved.

  • Legal
  • Privacy
  • Security
  • Fraud
  • Accessibility

This content is intended for Institutional Investors Only (Plan Sponsors, Consultants & Group Advisors).