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The valuations of developed government bonds look stretched in light of our economic outlook, but we still see them providing diversification – albeit less so with some yields near levels we consider to be their lower bounds. Quality equities and a focus on sustainability also can provide portfolio resilience.
Implication: We prefer U.S. Treasuries to lower-yielding peers as portfolio ballast and see a strong case for integrating sustainability into investment processes.
Why we favor U.S. equities
Relative weight in global equity quality index by country/region, 2020
BlackRock Investment Institute with data from MSCI as of April 7, 2020. Notes: The bars show the weights of the regional markets in the MSCI ACWI Quality Index minus those on the MSCI ACWI Index. Indexes are unmanaged. You cannot invest directly in an index.
Bottom line: We prefer U.S. Treasuries to lower-yielding peers as portfolio ballast and see a strong case for integrating sustainability into investment processes.