BlackRock’s global fixed income CIO Rick Rieder talks Turkey, ESG, liquidity and big data

A strengthening dollar led to outflows across emerging market asset classes in recent weeks, with Turkey and Argentina hardest hit. Are they the first in a line of dominos, or are fundamentals strong enough to ride out this turbulence?

With all eyes on the direction of central banks’ monetary policies, investors continue to be frustrated by government bond yields, though there are attractive returns to be found in other areas of the market

Investors have been deprived of the benefits of diversification since the financial crisis as equity and bond returns have mostly been moving in tandem. But the correlation between asset classes has started to fall away, just as it has within equity markets themselves

Given the low yield environment, fixed income investing is less able to play its traditional role. But rather than taking on more risk to hunt for yield, should bonds be used in a more defensive manner to diversify portfolios? 

Greater flexibility in asset allocation, looking across the whole spectrum of equities and fixed income, is something investors should consider

Most investors need income, which is why bonds still have an important role to play in portfolios despite low interest rates. But fund selectors must pay attention to liquidity 

The potential of higher interest rates and a slowdown in the global economy should be bad news for high yield bonds, but default rates remain low and many believe the sector is well placed to ride out market volatility