If February 2018 was the month when volatility finally returned to equity markets then March 2018 was when it started to hurt investors. In February the sell-off was followed by a rebound but in March the market jitters over the escalating trade war rhetoric and technology stock sell-off showed little respite.
If you look at the latest heatmap once again cash was King. Interestingly bond fund returns recovered as Trump’s trade war gave rise to concerns over global economic growth which is good for bonds. The positive relationship between bonds and equities that we saw in February diminished meaning bonds have returned to the fold of the BOTB once again, proving a good diversifier to equities. It will be interesting to see whether that lasts. Yet the risks of owning bonds and gilts, and in particular index-linked gilts, have increased slightly, perhaps more so than some investors may anticipate.
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