The global economy is moving into a new, more fragmented phase, defined by greater dispersion between countries, more policy uncertainty and a wider range of macroeconomic volatility.

For the past few years, investors have largely been focused on the same set of questions: inflation, central bank tightening and recession fears. While those issues have not disappeared, they give way to a more complex environment in which major economies are increasingly charting their own paths ahead.

The United States continues to display remarkable resilience, supported by ongoing business investment and relatively healthy private-sector balance sheets. Economic activity has held up far better than many expected. The consensus has repeatedly underestimated the adaptability of the US economy.

Europe, by contrast, faces a more subdued outlook, reflecting weaker underlying growth and a different set of structural and cyclical challenges.

Japan, meanwhile, is navigating a gradual departure from the extraordinary policy settings that defined much of the past generation.

These divergences are becoming increasingly important for investors.

For some time, investors could take comfort in the fact that most developed economies were moving in broadly the same direction. That is becoming less true. The range of potential outcomes is widening, and with it the importance of being selective, flexible and prepared to look beyond consensus views.

At the same time, the role of central banks is evolving.

Monetary policy remains an important part of the story, but it no longer dominates the investment narrative to the same extent.  Today, investors are just as focused on government borrowing, fiscal policy, productivity growth, labour market developments and technological change. In many respects, these factors are becoming just as influential as central bank decisions.

This shift has significant implications for fixed income markets.

The most obvious is that bond yields across advanced economies are considerably higher than they were for much of the previous decade.

Indeed, higher yields create a broader investment opportunity set. They also provide an important signal.

They reflect a world in which inflation appears less predictable, fiscal positions are deteriorating, geopolitical risks are rising and investors are demanding greater compensation for uncertainty.

In that sense, bond markets may simply be recognising that the risks embedded in the global economy have increased, while also pricing for renewed growth prospects.

None of this is to suggest the risks have disappeared.

It is entirely possible that interest rates settle at higher levels than investors became accustomed to over the past decade. Governments are carrying more debt, fiscal deficits remain elevated in many countries and the world is becoming more fragmented from both a geopolitical and economic perspective. Those forces could well keep the cost of capital higher for longer.

We also shouldn't automatically assume bonds will behave exactly as they have in the past. One of the lessons from recent years is that inflation shocks can be painful for both shares and bonds at the same time. Some of the diversification benefits investors took for granted in earlier decades may prove less reliable in a more volatile environment.

That said, it's important not to lose sight of where we are starting from today.

For much of the post-GFC period, bond investors were accepting very low yields and relying heavily on further falls in interest rates to generate attractive returns. Today's environment looks very different. Investors are once again being paid a meaningful level of income, and that income matters. It can help provide a buffer against uncertainty and support a stronger foundation for long-term returns than we have seen for many years.

In many ways, the investment case for fixed income today is less about making a bold macroeconomic call and more about valuation. When yields are low, there is little room for error. When yields are higher, investors have a greater cushion and a broader range of opportunities to choose from.

The challenge is not determining whether uncertainty exists. Uncertainty is always present. The more important question is whether investors are being adequately compensated for the risks they are taking.

That is where we continue to focus our attention. In a world that is becoming more differentiated, more volatile and arguably more unpredictable, the ability to identify value and be selective remains as important as ever.