When you look at the current macro environment and what it means for risk assets and fixed income, “it’s been simplified, dare I say it, to the letter of the alphabet: is it a V, W, U or L economic recovery? Our view is that we’re in a base case of a W-shaped and, important to note, an upward sloping W-shaped recovery,” said Chris Wilson, CFA and Senior Client Portfolio Manager at Voya Investment Management, at Pensions & Investments’ Fixed Income & Credit virtual series. “While we saw some pretty spectacular growth numbers for the third quarter, we don't think we're fully out of the woods. There'll be fits and starts, even with the fiscal stimulus that's certainly a catalyst which can add some volatility along the way. But the overall economic picture is broadly supportive, in part with GDP expectations and anchored by a supportive monetary policy with what is effectively a zero interest rate policy from the Federal Reserve.”
There was considerable cash on the sidelines as investors moved to risk off in the early days of the pandemic, noted panelists at the session titled, ‘Risk On? What Strategies are Providing the Best Opportunities and How to Set Parameters.’ “It’s not just cash in investor's pockets, but it's also cash on corporate balance sheets,” pointed out Wilson. “While some were worried about an explosion in corporate bond issuance, the important thing is what they did with those proceeds with the combination of extending maturities and allowing cash balances to grow to stabilize balance sheets. We believe that cash is that fuel for future growth as well, which will continue to allow a constructive view on market opportunities going into next year,” said Wilson, who is also a member of the multi-sector fixed income team at Voya.