Investors need to position themselves for a different and more complex environment.

The fixed income world is beginning to undergo a multiyear transition as aggressive monetary accommodation and government spending across key economies drive higher near-term economic growth rates. The result could be a shift to higher real rates as output gaps narrow, as well as moderately higher but stable inflation. In our opinion, this bodes well for risky assets, but will likely be accompanied by increased volatility and changing correlations. We outline our views in this report.