Market View I Dickie’s View June 2026

Richard “Dickie” Hodges, Manager of the $2.6bn Nomura Global Dynamic Bond Fund, provides his view of the fixed income market environment:

Published 12 June 2026

Strategy & Positioning – Looking Forward

• Ongoing tensions between the US and Iran keep uncertainty elevated. While the de-escalation is positive, it is just as fragile. Markets are likely to stay focused on news flow around the conflict until a resolution is reached. Timing an end to the conflict is still not possible.

   

• That said, with US mid-term election approaching, pressure is increasing for President Trump to turn public opinion in his favour. Trump’s and the Republicans’ approval ratings have been declining since the US attacked Iran, and signs of a prolonged conflict have made things worse.

   

• The longer energy prices remain elevated, the greater the risk of higher inflation rates. This would most likely deteriorate the cost of living and potentially negatively affect asset prices. Neither of the two help improving the Republican’s approval ratings ahead of the mid-terms. It is therefore still in the interest of President Trump to end the conflict with Iran sooner rather than later.

   

• Risks from the conflict aside, the US economy still appears robust. Growth dynamics are still positive, consumption is holding up, and even the previously cooling labour market has been surprising to the upside recently.

   

• Against this backdrop, the Fed is likely to keep rates on hold for the time being. This is where we agree with market pricing. In Europe, markets expect two hikes from the ECB and the Bank of England until the end of the year, which is too hawkish in our view. There is potential for markets to lower their rate hike expectations, which would provide tailwind for European bond markets.

   

• The benign macro environment favours risk assets, as income (or “carry”) is likely to dominate returns in fixed income markets. We therefore keep our risk exposure to Financials and Emerging Markets, while we allocate to Convertibles for their attractive capital return potential.

   

• Geopolitical risks are not abating. While all eyes are on the Strait of Hormuz, the risk of other flashpoints flaring up is real. It is essential in our view to consider unknown sources of volatility. We have equity put options in place for this purpose. These become profitable in case equity markets correct by a larger magnitude. CDS index hedging remains an important part of our strategy. Credit spreads have tightened significantly, making credit vulnerable to volatility.

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