Stock exchange traders on Wall Street: Inflation and interest rate risks and now also the problems of the banks are causing great nervousness on the financial markets.,
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The money managers at Lazard Asset Management avoid risky investments. Instead, they pay attention to high quality when selecting bonds – and warn of a second wave of inflation.
Dhe central banks must be careful not to relax too early in the fight against inflation. In an interview with the FAZ, Benjamin Dietrich, portfolio manager at Lazard Asset Management, warns of a second wave of inflation like in the 1970s and 1980s, which could be even more painful. The Fed is likely to hike interest rates twice more by a quarter of a percentage point, bringing it to between 5.25% and 5.50%, says the New York-based bond strategist.
In times of low interest rates, the investment world was nowhere near as complex for him as it is today. Bad investments would now be quickly punished. “We continue to expect a turbulent phase on the financial markets,” says Dietrich. That’s why he pays attention to the high quality of the borrowers when it comes to bonds. Their creditworthiness should therefore be in the investment grade range. Dietrich also prefers short maturities. On this basis, returns of between 3 and 5 percent are possible. Dietrich points to the six-month US debt instrument (T-bill), which offers a risk-free interest rate of 4.9 percent. In comparison, the risk premiums (“spreads”) for riskier bonds are historically unattractive.