Even when the data doesn’t agree, you still have to keep trading
3 AUG, 2026
By Luke Hickmore from aberdeen Investments
The current moment is a textbook example. Spreads on sterling "IG"-rated bonds are sitting near cycle lows. At first glance, the fundamentals look solid: interest coverage is holding up, default rates are low, and primary markets are functioning properly. Yet the macro data tells a different story: persistent inflation, a rising term premium, and a Bank of England that wants to cut rates but still doesn't dare to. New-issue concessions are thin. Secondary market liquidity is patchy exactly when you need to move real size. Everything you'd want to be true for spreads to keep tightening, is true. And yet the asymmetry feels wrong.
When waiting doesn't pay off
The textbook answer when signals conflict is: wait for confirmation. But I think the textbooks are wrong here. Waiting is a position, and in investment grade it's usually an expensive one.
Carry doesn't stop while you make up your mind. The cost of being out of the market for a quarter with total returns of 5.5–6% is real, and you don't get it back once clarity arrives. By then, the move has already happened.
So my approach, such as it is, isn't really an approach. It's three things I try to hold myself to.
Size matters
First, separate direction from size. I may genuinely not know whether spreads will tighten or widen from here. What I do know is which way I want to lean, and how much that view would cost the portfolio if it's wrong. Position size is the decision that usually saves you – not the direction call.
Where conviction lives
Second, choose the trades where the data disagrees the least. If the macro data and the fundamentals point in the same direction for a specific sector or issuer, that's where conviction lives, even if the bigger picture is murky. Uncertainty at the macro level doesn't have to mean paralysis at the name level.
Take the risk and set indecision aside
Third, accept that conviction isn't certainty. It's the tolerance to be wrong in public, repeatedly, while the thesis plays out. If I had to be right every quarter to feel comfortable holding a position, I'd never hold anything.
The ultimate question
What I'm watching for now is whether the disconnect between spreads and fundamentals closes through better fundamentals or through wider spreads. The honest answer is that I don't know, and the data won't tell me until it's too late to act. The question I keep coming back to isn't "What's the right decision?" but "What's the right decision when I have to make it before it's possible to know what the right decision is?"
That's the job. Anyone who tells you otherwise is selling you a backtest.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of RankiaPro, its affiliates, or any other agency, organization, employer, or company. This content is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any financial instrument.
