Following 525 basis points in rate hikes over a period of 16 months, fixed income investors find themselves in a very different world than the zero-percent regime that ensued after the Global Financial Crisis (GFC). Now that it appears the Federal Reserve (Fed) is done raising rates, the question on investors’ minds will be: Where do we go from here?
While gains have been made on the inflation front, we are still a fair way off the Fed’s 2% target. The challenge the central bank faces is that the economy and the labor market have held up fairly well, despite the rate hikes. Until we see some meaningful softening in these areas, it is unlikely the Fed will make any significant cuts to interest rates.
Therefore, we think rates are likely to stay elevated for a longer period, and investors would do well to position their portfolios accordingly. What does that look like for fixed income allocations?
Volta Finance Ltd (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.