Aegon Asset Management

Drawing on deep expertise, measured judgement and skilful market navigation, we scan the horizon for risks and opportunities, discovering fresh perspectives and insights to shape better investment outcomes.

Bond markets are enduring one of their most uncertain and volatile periods in recent memory.  Market consensus views have been formed and abandoned in response to the changing macro and political backdrop, resulting in an environment where high-conviction views about the market outlook are more difficult to find. While uncertainty might not be everyone’s best friend, the volatility it brings supports a strong argument in favor of active duration risk management.

One story has dominated bond markets in the last month, the US trade tariffs. Although they had been widely anticipated, we are not sure anyone had on their bingo card that the Trump administration would announce such aggressive and comprehensive tariffs….and do so using their own giant bingo card! Listen to the latest Thinking Out Loud for the latest thoughts from Colin Finlayson, investment manager, Fixed income.   

The bar has been set high for global equity markets going into 2025. Two years of strong returns could lead investors to question: is there any room to move higher? We think so, but it’s not as simple as just buying the market.
 

Corporate bonds performed well in 2024, but government bond volatility dampened overall fixed income returns. Central Banks fell short of market rate-cut expectations, with resilient economies, especially in the US, and political upheaval fueling turbulence. Will 2025 bring similar challenges?

The macroeconomic outlook suggests moderating growth and controlled inflation. However, uncertainty has risen post-US election, with the new administration's policy agenda still unclear. Proposed trade tariffs may initially boost US inflation but could dampen growth modestly. Global impacts may skew negative, widening divergences between the US and Europe, China, and others.

Bond markets decided against a traditional “quiet summer” and instead gave us two bouts of volatility to book-end the period – the snap French elections and the “flash crash” in August.

Investors increasingly seek to align financial goals with their values. This article explores ethical funds and shows how our investment solutions combine ethical exclusions and stock selection to create responsible, transparent portfolios.

The Olympics – where athletes defy gravity, national pride soars, and corporate sponsors dream of stock market glory. Despite the first modern Olympics being held in Athens in 1896 the man responsible for the rebirth was a Frenchman called “Pierre”.

Investor allocations to bonds have been low in recent years with many investors preferring to hold cash or money market funds instead. In the period of low/rising bond yields and high deposit rates, this made perfect sense. Now, as we enter the next phase of the interest rate cycle, this is no longer the case.

So far, much of 2024 has been a waiting game with the market focused on US inflation and when it might spur the Federal Reserve (Fed) to cut interest rates. However, there have been signs that the Fed’s string of rate hikes may finally be bringing inflation under control. Monthly inflation was flat in May—its lowest level since July 2022—which helped push the year-over-year inflation rate down to 3.3% from 3.4% in April. 

In the latest Strategic Thinking video, Alex Pelteshki, co-manager of the Aegon Strategic Bond strategies, discusses the current market environment with central bankers across both sides of the Atlantic rushing to repeat that the path of their policy rates is exclusively data dependent from here on. Alex also talks about the market reaction and the outlook for fixed income, explaining why the team believe there is room for the US Treasury Yield curve to become steeper by year end, making it one of the biggest opportunities out there.

The dust is settling on a historic election result. A Labour landslide on the scale of 1997 gives new Prime Minister Sir Keir Starmer a huge majority and leaves the Conservatives licking their wounds, having gained their lowest share of the vote and lowest number of MPs ever. The reaction of financial markets was less spectacular though.

Hot on the heels of Meta Platforms, tech giant Alphabet has joined the dividend game. Both companies’ join Microsoft, Apple and Nvidia as ‘big tech’ dividend payers. Beneath the surface more tech dividends are emerging, with Salesforce and Booking.com having their dividend debuts in 2024. This is a significant development for a space with a long-held preference for buybacks. 

For income-oriented investors, now is the time for bonds. As rates have shifted higher, coupon rates on newly issued bonds have continued to climb higher, offering income opportunities rarely seen in recent years. Notably, we think high yield bonds are worth a closer look as they provide high income and compelling total return potential. 

Back in 2020, I penned an article titled ‘The Dividend Dilemma’. It was the depths of the Covid-induced market selloff; companies were cutting or suspending dividends left, right and center; and analysts were predicting big cuts to global dividends from which they would take years to recover. I anticipated a fall of around 30%.

High yield and investment grade credit markets continue to look very attractive on a multi-year horizon. In fact, we find the market as attractive as it has been in nearly two decades. High yield looked great at the tail end of 2023 with the yield-to-worst on the Bloomberg U.S. High Yield Corporate Index pushing over 9%. At end of March 2024, it is 7.7%, which is still above 15-year averages. Likewise, yields in investment grade credit also look appealing. The yield-to-worst on the Bloomberg U.S. Corporate Investment Grade Index is above 5%, again a multi-year high. This still represents a good starting point and is also one of the main reasons we are positive on bonds this year.

The maturity wall has been a hot topic lately—and rightfully so. After all, the ability of issuers to repay their debt obligations is a key consideration for bond investors. And assessing the upcoming maturity schedule becomes even more critical for high yield companies, some of which may face strained liquidity or challenges accessing capital markets.