28 March 2025
As equity markets take another hit from more US tariff announcements – this time on autos – it’s tempting to avoid investing altogether.
That would typically mean sitting on cash. But in cash investors are likely to get squeezed too, as policy rates are cut across Europe and the US.
As investors fear that the impact of tariffs will lead to businesses and households holding back on spending, they are turning to bonds. This is because weaker growth gives central bankers more reason to ease monetary policy, principally by cutting rates.
As market rate expectations fall, so do government bond yields, because these have little in the way of credit risk and price according to the expected path of policy rates.
This means that a diversified portfolio of equity and bonds is doing exactly what is say on the tin: dampen volatility while growing your investment over the longer-term. This is not a re-run of 2022, where slowing growth coincided with rising policy rates.
Instead, we see another three rate cuts from the US Federal Reserve this year and expect the Bank of England to go even further, with 6 rate cuts between now and Q3 2026.
That’s why our key priority right now is to strengthen portfolio stability with multi-asset strategies.
Source: Bloomberg, HSBC Global Private Banking and Wealth as of 27 March 2025. Past performance is not a reliable indicator of future performance
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