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SocGen: the 5 Best Risk Adjusted Yield-based Investments

Here’s an interesting perspective from SocGen on yield based strategies. Ā I thought I’d pass this along for your own research (via Bloomberg):

Economic slowdown in developed, emerging markets will force another round of monetary easing, Ā pushing yields at long end across all asset classes even lower, Societe Generale strategists including Guillaume Salomon and Georgios Oikonomou write in note to clients.

Best risk-adjusted, yield-based expected returns:

* Buy investment grade, high yield bonds; U.S. non-investment grade corporate bonds have best risk/reward
profile, have been lagging S&P 500 recovery

* Buy U.S. mortgage-backed securities given very low volatility, excellent Sharpe ratio

* Finance long gilt (in GBP) by short JGB (in JPY) as gilts offer higher carry than JGBs

* Buy emerging market bonds because of much higher yield than developed countries; best carry-to-volatility ratios in Argentina, Egypt, Peru

* Buy quality income stocks as high div. yield is not enough as cos could cut dividend

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