So, where’s the fear? Much of this has, explains Gartside, has been tackled by the actions of central banks.
He explains: “People forget that in the first weeks of 2016, many people thought the world was ending – equities were off around 10%, there was a view that we would soon be in recession, but central banks did extraordinary things.
“In Japan they moved to a negative deposit rate; in Europe they went further negative with QE to buy corporate bonds; and there was an expectation that the Fed would move interest rates four times in 2016.
“Central bankers were very alert and there’s no doubt that’s really helped underwrite growth this year. At the start of 2016, in Europe the average yield on the corporate bond index was around 1.5%, but by the end of the year was 0.9%.
“When we talk about getting low borrowing costs to the broad economy, that’s a success for central bankers.”
Fast forward to 2018, and central banks may stir up investors’ animal spirits further – Gartside expects three further Fed hikes this year, and another four in 2018. Will a rustling of the feathers of the hawks and doves cause further fear?
Conversely, the big threat for bond investors, says Gartside, is that growth in the UK and US is significantly stronger than people think.
“With a huge amount of QE and record low interest rates, you can construct an argument that says that the levers are working,” he explains.
“Following the Brexit vote, the UK economy has defied all expectations and grown significantly stronger than expected.
“With stronger growth than we expect, there’s a risk that people see the Bank of England base rate of 0.25% and gilt yields at 1% as absurdly low and you get a wholesale repricing of not just interest rates, but bond yields go significantly higher”.
