Here’s an interesting perspective from SocGen on yield based strategies. I thought I’d pass this along for your own research (via Bloomberg):
Economic slowdown in developed, emerging markets will force another round of monetary easing, pushing yields at long end across all asset classes even lower, Societe Generale strategists including Guillaume Salomon and Georgios Oikonomou write in note to clients.
Best risk-adjusted, yield-based expected returns:
* Buy investment grade, high yield bonds; U.S. non-investment grade corporate bonds have best risk/reward
profile, have been lagging S&P 500 recovery* Buy U.S. mortgage-backed securities given very low volatility, excellent Sharpe ratio
* Finance long gilt (in GBP) by short JGB (in JPY) as gilts offer higher carry than JGBs
* Buy emerging market bonds because of much higher yield than developed countries; best carry-to-volatility ratios in Argentina, Egypt, Peru
* Buy quality income stocks as high div. yield is not enough as cos could cut dividend
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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