Build a resilient portfolio amid higher-for-longer rates

“DO NOT bet on interest rate cuts anytime soon”. That is the current sentiment on the street, boosted by stickier-than-expected US inflation and January’s strong jobs data. This is in sharp contrast to market sentiment just a month ago, when many thought central banks could begin to take a step back after the aggressive rate hikes of 2022.

Whether this period of inflation is structural or cyclical is still unclear. But what is clear is that investors should position their portfolios to navigate higher-for-longer rates.

Liquid+ Strategy

At the DBS CIO office, we saw a huge opportunity to factor in an allocation to cash alternatives. We formulated the Liquid+ Strategy, which constitutes a high-quality, short-duration diversified bond portfolio, with both government Treasuries and investment-grade (IG) corporate credit. We postulated that this would be a better substitute for cash in the medium term.