Allspring Global Investments just figured out other countries exist. They're telling clients to buy bonds in places where central banks are raising rates or have different inflation dynamics. Revolutionary stuff. Next they'll recommend looking at the bond prices before buying them.
The pitch is simple. U.S. rates are doing one thing. Foreign rates are doing different things. Therefore you should diversify. This is the kind of insight you get when you pay management fees to a firm that needed to rebrand after Wells Fargo dumped them.
Here's what they're not telling you. When they say "different inflation dynamics" they mean "we have no f*cking idea what's happening but it sounds scientific." Central banks raising rates sounds bullish until you remember raising rates is what central banks do when everything is on fire. So you're being sold bonds in countries where things are currently on fire as a hedge against things being on fire in the U.S.
The timing is perfect. Retail investors spent two years learning what duration risk means by losing money on it. Now they get to learn what currency risk means. And sovereign risk. And political risk. And the risk that the country whose bonds you bought decides to print money and tell you to go f*ck yourself.
But sure. Prioritize foreign bond markets. Chase yield in countries you can't find on a map using currencies you can't pronounce. Allspring will collect their fees either way.
The funniest part is calling it prioritization. Like you're reorganizing your task list. "Today I'll prioritize Brazilian bonds over my daughter's college fund." That's not prioritization. That's just buying different bonds because your advisor needed something to say in the quarterly call.
Allspring Global Investments: reminding clients that maps have more than one country since 2021.
Photo by Markus Spiske on Unsplash
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