One of the big losers of the past year has undoubtedly been fixed income derivatives which have offered negative returns in almost all cases. It is enough to remember that all Investment funds that are based on this financial asset have been depreciated in this period. Something that had not happened for some years. Precisely in a year in which equities have not done well at all. Where the selective index of Spanish equities, the Ibex 35, has left more than 10% of its listed value.
In any case, the most negative results have corresponded to financial assets from fixed income. In its most diverse forms, from corporate debt to emerging bonds, all of them have been marked by their clear negative evolution in the financial markets. In this new year, this general trend is expected to continue, although it may lose some intensity. Either way, there are segments in fixed income that may emerge from now on.
One of the objectives of any small and medium investor will be to detect these business opportunities within the important fixed income sector. Where it will be very important to take into account which are the products that have a more or less stable growth potential for the next few years or, on the contrary, those that are in a deep downward trend that will inexorably continue during the coming months. or even years. With the consequent damage to your next investment portfolio.
Fixed income: peripheral bonds
Of course, one of the most popular products at the moment are the so-called peripheral bonds and that refers to the public debt of the latin countries of the old continent. Among which are Portugal, Italy, Greece and of course Spain. They are part of a good part of the investment funds based on fixed income and, as in the other financial products, they have had a bad year in the financial markets. With a strong depreciation of their financial assets and that has led many participants to have lost more money than expected in these investment models.
In any case, peripheral bonds are a riskier fixed income product due to the weakness of the economies of the nations that hold this financial asset. However, if they recover their positions, it could be one of the options for make capital profitable During this year that is so complicated for the fixed income markets. In this sense, it can be one of the big surprises in the coming months if some of the problems that these have are fixed and that penalize their corresponding public debts. In any case, it will be one of the products to consider from now on.
High yield bonds
Surely you know that these bonds were among the most profitable in the corresponding periods between 2014 and 2017. To the point that they are known by many of the financial agents as high-yield bonds. Although as you can imagine, its risks are also higher than in the rest. They are part of many of the investment funds based on fixed income and are linked to companies and a large part of the geographical and economic areas around the world.
Well, it is the bonds of these characteristics and that are exposed to Asia that can generate the highest returns from these precise moments. In particular, because they present very attractive prices and there is no doubt that it is cheap at the moment. Mainly because as soon as trade tensions with China ease, they will have a more favorable response in the financial markets. With the possibility that they could be one of the great surprises in this new year that has just started.
Another option: emerging debt
The big bet on the part of financial analysts, although on the other hand it is the investment bet with the highest risk of all. Not surprisingly, their percentages are very intense in one way or another. There are no middle ground with this kind of investment as special as that derived from emerging countries. On the other hand, another aspect to consider is that not all emerging markets are the same. Not in the same Brazilian debt than from China. It is true that in both cases they are emerging, but with a very diverse nature as you can understand for many and varied reasons.
On the other hand, you have to see the emerging debt is facing a great dilemma that can complicate the choice. The past year 2018 has been a veritable roller coaster for emerging markets that has brought both joys and disappointments. With a volatility in their valuations that has been extreme in a good part of the past months. Argentina, Brazil and Turkey are just a few examples of countries that have been very active during this very special period for fixed income in general.
A turning point
In any case, 2019 could be a turning point for these important financial assets in the financial markets. In any case, everything seems to indicate that from now on all the conditions are in place for the emerging debt to be at this time more solid than in past exercises. Because indeed, nadir doubts that it may be another of the great surprises that this new year that has just begun will not bring. And with the advantage that the return it can offer is more interesting than that of other bonds or fixed income products.
On the other hand, the so-called bonds remain as an alternative investment grade, although they will be better open positions better in Europe The main reason in the US is that the escalation of the trade war has been postponed and thus one of the greatest uncertainties for the market of these very particular characteristics has been dispelled. On the other hand, it cannot be forgotten that valuations are at attractive levels and there is room for positive surprises and narrowing of spreads. To the point that they can give more than one joy to small and medium investors from now on.
Safer financial bonds
It remains to analyze sovereign bonds, which may be the most stable product to face it without excessive problems. Despite the fact that fiscal year 2018 ended with a very negative feedback, even in investment funds that have combined their investment portfolio with other financial assets of special relevance. That is, through mixed models between equities and fixed income. While on the other hand, it is very convenient to remember that this investment format does not go through the best of times. If not, on the contrary, and that generates that it is also exposed to many and intense risks that can lead to you losing many euros on the way that leads to the new end of the year.
On the other hand, this class of well-known bonds is characterized by its low profitability in bullish periods. Where it marks some percentages that are included in a fork that goes about 2% to 4%. Where it will be very difficult to improve these narrow intermediation margins. Unless there is a change in the international economy and that will depend on the level of growth in international economies and especially in the United States and the euro zone.
Global economic slowdown
Finally, it should be noted that budgetary stimuli and the tightening of financial conditions will play a very relevant role in shaping the evolution of these more than notable first-level financial assets. Because indeed, the outlook for the Fed this year has been dyed black given the appearance of certain signs of an economic slowdown on the other side of the Atlantic. Beyond other technical considerations and until it can also from the point of view of its fundamentals. Although in any case, it will have to be taken into account in order to form the next investment portfolio based on fixed income.
In this regard, the important fact that most asset classes posted negative returns, while USD monetary assets outperformed bonds and equities for the first time since 1992, cannot be overlooked in any way. Very relevant fact that has not been seen for many years and that can determine the performance of the different financial assets from now on. In one sense or another, and so that you can open positions, either independently or through investment funds based on fixed income. Which is at the end of the day what small and medium investors are looking for and are all about. Only twelve months will remain to verify this reality.