If U.S. employment and economic growth continue, quantitative easing is likely to end in the second half of 2014, says Alison Martier, senior portfolio manager ‒ fixed income at AllianceBernstein. In the session ‘Is It Time to Abandon the Benchmark? The Role of Unconstrained Bond Strategies in Today’s Fixed Income Portfolios,’ she said interest rates will normalize over time with the Fed funds rate expected to begin rising in 2015. However, while the yield curve is likely to remain steep, credit spreads should remain attractive and default risk low. Volatility is likely to remain high and could be exacerbated by fund flows. She suggested investors should go global, increase credit exposure, adopt absolute return, and shorten TIPS duration.
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