With investors skittish about deflation and inflation, Barclays Wealth is recommending a portfolio that is overweight in risk assets such as equities and high-yield credit, as well as long dated bonds, while remaining underweight in cash and investment-grade credit.

For this “barbell” approach to work, both stocks and bonds have to face relatively limited downside, according to Kevin Gardiner, head of global investment strategy for Barclays. “If this weren’t the case, what we gained at one end might be given back at the other,” he said in a statement. He added that the “reduced likelihood of a hike in official interest rates on both sides of the Atlantic offers a degree of support to bond prices,” which means that a major sell-off appears to be unlikely with such a steep curve. 

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