Manulife Investment Management

Macro Outlook:
A 360° Income Approach

Protecting returns despite global uncertainties

Low but positive global growth Learn more Learn more

Rates are retreating Learn more Learn more

High-yielding credit as bright spots Learn more Learn more

Low but positive global growth

Growth in Europe and parts of Asia are slowing, but we see a continued positive expansion in the US - supporting our belief that the general global growth trend will remain positive.

That said, there are concerns that this trend may be slowing, which could expose us to the risk of shocks.

Rates are retreating

In response the threat of a slowdown, the US Federal Reserve and other central banks have adopted a more accommodative monetary stance.

While further cuts to benchmark interest rates have pushed a greater share of developed-market bond yields into negative territory, increasingly low and negative rates imply that the search for yield will remain a dominant income theme in the immediate term.

Developed market sovereign yields – select countries¹

High-yielding credit as bright spots

In this "lower for longer" interest rate environment, central banks will find it harder to stimulate economic growth by reducing rates. Low rates could create a bubble environment and central banks must balance this risk with a slowing underlying economy.

In a low rate and low growth environment, there is a bright spot: credit. Default rates remain low² while asset classes trends positively; companies that continue to generate positive earnings and cashflows can reduce their debt burdens and enhance liquidity, while investors may see spreads over underlying government rates deliver rewarding income returns.

Source:

Refinitiv Datastream, Manulife Investment Management, as of 19 September 2019.
Bank of America Merrill Lynch, as of 31 August 2019. Credit trends remain positive although with the business cycle getting old, credit trends could reverse in the short run if there’s any extended disruption in the markets.

Macro Outlook

Re-entering a “lower for longer” rate environment

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