Current portfolio positioning and strategy
Over the secular horizon, we expect a very different macro landscape to emerge, reflecting shifts in the monetary-fiscal policy mix, rising protectionism and economic nationalism, and the potential for a recession over the next 3-5 years. Our cyclical outlook, however, remains more favorable: we expect world GDP growth to remain above-trend at 3.0%‒3.5% in 2018 as fiscal policy helps sustain solid growth and inflation rises modestly. Compared with our December forecast, we see marginally higher 2018 GDP growth in developed regions. Our inflation forecasts for 2018 are also higher compared to our December forecast in response to a higher oil price trajectory.
We are underweight duration overall. We have a preference for U.S. duration against rate exposure in other developed regions, including the U.K. and Japan.
The intermediate portion of the curve continues to offer attractive characteristics while longer-term rates may rise as the Fed continues to reduce accommodation and term premiums return.
We find attractive opportunities in specific credits that benefit from U.S. growth and a resurgent housing sector. We see value in banks and select financial companies as well as housing-related credits.
We remain tactical with currency positioning, particularly given less conviction in the overall direction of the dollar. Select high carry EM FX may be attractive as diversifying risk exposures.
As of 30 June 2018
Portfolio information in the charts is based on the fund's net assets. These percentages may differ from those used for the fund's compliance calculations, including the fund's prospectus, regulatory, and other investment limitations and policies, which may be based on total assets of the fund or other measurements, may include or exclude various categories of investments from those covered in the portfolio allocation categories shown in this report, and may be based on different classifications and measurements of the fund’s investments and other criteria.
All holdings are subject to change daily. All share classes have the same portfolio but different expenses.
Duration is a measure of a portfolio’s price sensitivity expressed in years. Effective duration is the duration for a bond with an embedded option when the value is calculated to include the expected change in cash flow caused by the option as interest rates change.