Institutional investors’ allocations to dollar-denominated bonds have dropped to the lowest level since 2007 as strategists at Morgan Stanley and JPMorgan Chase & Co. see a shift away from the debt that may fuel higher borrowing costs.
Morgan Stanley’s $1.8 trillion wealth management unit has been advising clients to cut bond allocations to the lowest in more than five years.
“Equities will outperform bonds over a seven-year timeframe because bond yields are already so low,” Darst, who oversees investment strategy at Morgan Stanley Wealth Management, said in a telephone interview. “We’ve got a slight underweight in junk bonds. We have a big underweight in corporate and government bonds.”
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