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The first quarter of 2022 saw negative returns across the U.S. bond market as persistently rising inflation surprised central bankers and bond investors alike. Dramatically rising interest rates have focused bondholders’ attention on fixed-income investments – even provoking some to abandon the asset class entirely.

In this episode of Market Currents, Northern Trust’s Katie Nixon welcomes Peter Mladina, director of portfolio research for Wealth Management, to explore the purpose of fixed-income securities in volatile and uncertain conditions, which seem likely to shape the investing landscape for the foreseeable future.

Mladina discusses:

The unique role of safer, risk-control assets in a portfolio and the foundational function they hold alongside return-seeking risk assets.
How investors can structure a portfolio to secure high-priority goals by matching the maturity of risk-control assets with expected liquidity needs.
Northern Trust’s Portfolio Reserve and how it is customized to secure a specified number of years of lifestyle spending.
Interest-rate risk and its headline role among the types of risk that fixed-income investors are exposed to, and a the way risk-control assets hedges them all through periods of volatility and unpredictability.

Peter Mladina is responsible for applying research, tools and methods that support asset allocation, portfolio construction, investment selection and best practices in portfolio management to the wealth management investment process.

Peter is an Adjunct Professor of Economics at UCLA, where he teaches applied finance for the Master of Applied Economics program. His research on asset allocation and portfolio construction has been published in peer-reviewed journals and he is a co-author of the CFA Institute’s revised Level III asset allocation curriculum. He received a Bachelor of Arts degree in Economics from UCLA and Master of Business Administration degree from Edinburgh Business School.

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Does value investing still work?

After many years of underperformance, value stocks have shown signs of life in 2021 as investors’ conviction in strong economic recovery has gained momentum.

Is this a turning point for value, or simply a short-term pop? Will value redeem itself, or will investors find their way back to growth stocks over the long term? Is something different this time?

To help investors answer these important questions — which have important portfolio implications — Northern Trust’s Katie Nixon is joined by the firm’s head of quantitative strategies, Michael Hunstad, and head of fundamental equities, Chris Shipley.

In this episode, you will learn:

If value really is a compensated risk factor
The valuation metrics and other criteria Northern Trust uses to define value and identify opportunities
The reasons behind value’s underperformance relative to growth in recent years
What needs to happen for value to sustainably outperform again
How to avoid value traps
If and how to maintain exposure to both value and growth stocks

Listen in as Katie, Mike and Chris explore the evidence and provide practical suggestions for investors grappling with the growth versus value conundrum.

Resources: Northern Trust | Katie Nixon | Michael Hunstad | Chris Shipley

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As Rates Rise, do Bonds Belong in Real-World Portfolios?

Value’s Uprising: Fête or Renaissance? – with Michael Hunstad and Chris Shipley