Report
What should investors do if central banks raise their interest rates much more than expected?
We assume in this Flash that to combat inflation, central banks raise their interest rates much more than has so far been expected or announced. What should investors do? Initially , avoid both bonds and assets linked to long-term interest rates (equities, real estate, infrastructure); Reassess the value of risk-taking (in High Yield bonds, private debt, etc.) if risk-free interest rates rise sharply; And therefore probably take refuge in short-term securities pending the stabilisation of long-term interest rates; Prefer short-term (not long-term) inflation hedges if monetary policy is sufficiently restrictive to bring inflation back down; prefer direct hedges (indexed bonds) over indirect hedges (real assets).
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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