Investors should consider pulling money out of European government bonds and domestic high-yield bonds, and moving the money into mortgage-backed securities, according to the latest recommendation from Robert J. Pelosky Jr. and his team of strategists at Morgan Stanley.
In a hypothetical, global balanced portfolio, Mr. Pelosky has cut the allocation to European government bonds by eight percentage points to 33% and domestic high-yield bonds by two percentage points to 4%. That 10% of assets should be invested in domestic mortgage-backed securities, he recommends. Mr. Pelosky is maintaining the overall allocation to fixed income at 24%, equities 68% and keeping 4% each in cash and alternative investments.
