Iveagh sees first phase of Fed policy tightening

A few words by US Federal Reserve chairman Ben Bernanke in May this year unleashed uncertainty, but what it really meant was the first phase in monetary tightening, according to Iveagh’s latest quarterly investment strategy view.

Chief investment officer Chris Wyllie said that what Bernanke did in May was the equivalent of removing stabiliser wheels off a child’s bicycle.

“Bernanke has told markets that they are going to have to start figuring out the right price for bonds for themselves once more rather than simply relying on the ‘Bernanke put’.”

A key area affected by this is government bonds. Wyllie notes, however, that while Iveagh is like many others in suspecting that government bonds at current prices will not be good long term investments, that is not the same as saying that investors should not have any allocation to the asset class.

“That might seem strange, but it’s all about strategic asset allocation.”

To read the strategy view and research click here: Iveagh Quarterly Investment Strategy

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