Beware these Four Big Themes in Bonds

Expect interest rates to stay lower for longer because odds are the world's economies are not going to improve much anytime soon, said Andres Sanchez Balcazar, portfolio manager for the recently launched Ivy Targeted Return Bond Fund. Balcazar said Europe's economy will most assuredly continue to crawl along because its banking union is not working out well and episodes like Brexit keep popping up. Meanwhile, over in Japan, Balcazar calls 'Abenomics' the "most experimental" economic process in the world right now. In Balcazar's view, the Bank of Japan is trying to control the shape of the yield curve and its efforts to get out of deflation hasn't shown signs of success yet. Over in China Balcazar said investors need to get used to slower growth rates from the once overheated emerging market. In his view, the country is shifting to domestic demand and commodity exporters will be impacted negatively. Taking these four themes into account, Balcazar said he is going long duration industrial credits in the U.S. and emerging market debt in U.S. dollars.