Bond Market Resiliency Through Geo-Political Threats

If I had to choose one word to describe the market during 2017, I’d say “resilient.” That’s notable because there were two major disruptions that could have resulted in prolonged volatility: the French elections and the Korean peninsula tensions.

Fortunately, the market bounced back quickly and low volatility has been the primary story this year. And in fact, we don’t currently see any change on the horizon—at least not in the short term. That’s why we’re starting to add a little more risk to our portfolios. One thing we still have a keen eye on is inflation. Will it continue being benign? Are the faint blips on the radar just that, or are they indicators that global inflation is starting to pick up?

In this quarter’s update, I dive into the three markets with the most risk for aggressive monetary policy: the U.S., the European Central Bank and the Bank of England. Where do we see the biggest risk, and what does it mean as we head into 2018?

Generally, as interest rates rise, bond values will decline. The opposite is true when interest rates decline.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

The opinions expressed are those of John Lovito and are no guarantee of the future performance of any American Century Investments fund.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.