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Resilient solutions

Are economic challenges just around the bend? Let us help you steer through the winding road ahead. Set your destination, prepare for some sharp turns, and be ready to recalibrate your portfolios along the way.

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Short-termism and market timing is not a winning strategy in the long run.

The key to success in this market environment is to construct portfolios that can succeed no matter where the economy takes us.

Watch this video about the challenges of 2023 and the uncertain investment environment they have led to (01:40)

The signals and the noise

Are we heading into a recession? Are we in one already? Use these economic signals to help determine where we stand in the business cycle. As it stands, there are some deep shades of red among leading indicators, giving us reason to believe that we’re heading towards challenging economic times in the near future.

U.S. economic indicators

This chart provides an overview of the overall economic environment in the U.S. It assigns leading, coincident, and lagging indicators to the identified signs of recession. While lagging indicators, such as job growth, are still in strongly positive territory, the most useful indicators about where the economy will be in the next 6 to 12 months are flashing red—many of them, deeply red. All the leading indicators are red or yellow. When we put this story together, we still see better-than-even odds of a recession hitting the U.S. economy around the fourth quarter of 2023 and a U.S. Federal Reserve (Fed) that must pivot toward potential rate cuts as a result.

Source: Manulife Investment Management, as of June 28, 2023. Red represents a clearly negative signal, yellow a deteriorating signal, and green a still strong signal. C&I refers to commercial and industrial. ISM refers to Institute for Supply Management.

Stay on top of the latest news and the events that are driving financial markets with our Volatility toolkit.

Learn more about our volatility toolkit

Where are we in the market cycle? What opportunities can be found?

The risk-return profile for fixed income is compelling in the current environment, but not all bonds are created equal. Our Capital Markets Strategy team weighs in on the fixed income opportunity, how to position your bond portfolio for what may come, and the tools you need to do so.

How bonds could offer more upside than GICs

Rising rates have renewed interest in GICs, but investors risk missing out on a rare opportunity in bond markets.

Watch the video to know more (1:27)

Not all bonds are created equal.

Be sure your fixed income approach is flexible enough to go anywhere to find opportunities and mitigate risk.

Even if more uncertainty is expected, brighter days are on the horizon, especially for bonds.

Watch the video to know more (2:05)

The three phases of fixed income

The opportunity in bonds can be broken down into three phases: the sweet spot, duration, and taking on risk

Watch the video to know more (2:33)

Bond yields are more attractive than they have been in the past

Yields across most, if not all, fixed-income instruments—regardless of maturity, type, or credit quality—have moved materially higher since the beginning of this year.

Various fixed income asset class yield to worst

Yields across most, if not all, fixed-income instruments—regardless of maturity, type, or credit quality—have moved materially higher compared to 2021. This bar chart compares the yields of six fixed-income asset classes in March 2023 to their yields in December 2021. In all six classes, the chart shows that yields in March 2023 are higher than in December 2021. In this phase, investors should focus on the yield provided by the bond or “clipping the coupon.” There’s no free lunch, and to obtain a higher yield, an investor must take on some sort of additional risk, whether it be, duration, credit, or even liquidity. This approach helps mitigate both duration risk from yields continuing to move higher and credit risk if we see default expectations increase in lower-quality bonds.

Proxies that represent these asset classes: Global Bonds- Bloomberg Global Aggregate Bond Index, Canadian Credit- Bloomberg Canada Aggregate – Credit Index, Canadian Government Bonds- Bloomberg Canada Aggregate – Government Index, US Government- Bloomberg US Treasury Index, US Credit- Bloomberg US Corporate Bond Index, US High Yield- Bloomberg US Corporate High Yield Bond Index. As of August 18, 2023.

Take advantage of the opportunity in fixed income

Manulife Strategic Income Fund

Offers diversification by geography, asset class, and risk with a go-anywhere approach in times of uncertainty

Learn more about the fund

Learn more about the opportunity in fixed income

Paving the way for a resurgence in bonds

Bonds are finally positioned to potentially provide meaningful returns to investors. Admittedly, the asset class has been a tepid source of income since the Global Financial Crisis, and it hasn’t been a reliable store of value in the post-COVID era. However, when it comes to generating income and preserving capital, the value proposition of bonds has been restored to an extent we haven’t seen in over a decade.
Read more about the recalibrated value proposition of bonds.

Advisors, to learn how you can leverage our Resilient solutions to support your practice, fill out the form and a member of our wholesaler team will get in touch with you shortly.

 

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Investing involves risks, including the potential loss of principal. Financial markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. The information provided does not take into account the suitability, investment objectives, financial situation, or particular needs of any specific person. Past performance does not guarantee future results, and you should not rely on it as the basis for making an investment decision.

All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment, or legal advice. Clients and prospects should seek professional advice for their particular situation. Neither Manulife Investment Management nor any of our affiliates or representatives (collectively Manulife Investment Management) is providing tax, investment or legal advice.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the fund facts as well as the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. 

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