Mike Gitlin, head of fixed income at Capital Group
In 2022, we saw disinvestment and losses for bond funds. But looking forward, we can be optimistic about a year of reinvestment and opportunity, according to Mike Gitlin, head of fixed income at Capital Group.
"A look at history shows that investing when the Barclays Global Aggregate Index is yielding around 3.5% and high yield is around 10%, as they are now, has produced strong results over the following years," he says.
"If we start to see inflation coming down, then we would expect central bank hiking to peak, and given the fact yields are as high as we have seen for several years after recent weakness, that should offer a fertile environment for fixed income."
Gitlin, who is set to become Capital Group's new CEO later this year, expects the firm to start taking more credit risk in areas where valuations look exciting, including high yield and emerging market debt. But he emphasises this will be a gradual process over the next six to 12 months.
"While we are starting to see more attractive opportunities, we are not expecting a rapid ‘snap-back' like in March/April 2020," he adds.
For more on the prospects for fixed income, read our exclusive Spotlight guide
