The most electrifying three weeks in sports has finally arrived – the time of year when Blue Bloods and Cinderellas compete, and the world becomes transfixed on the mayhem of the NCAA tournament. Around this time, I like to reflect on bond markets and what important similarities and differences we can draw from march madness.
There is little doubt that interest rates and debt prices have been turbulent lately, with amplified volatility and rapid changes. As you fill out your brackets, here are some thoughts…
Stick with Your Strategy
When people fill out a tournament bracket, usually they employ one or more strategies and principles to guide them (defense wins championships, teams with great guard play win in March, free-throw percentage matters in close games, etc). For investors, during uncertain times, recommit to your plan and don’t get distracted by shiny objects or the flavor of the day. Continue to do your fundamental credit analysis, re-underwrite your positions to account for tariffs or a recession, and stay the course.
Embrace the Uncertainty
Just as we love to experience the anxiety and heart-pounding nature of these games, markets typically hate uncertainty. However, investors should accept that the coming days and weeks may bring continued volatility as the economy adjusts to new policies around trade, regulation, taxation and others. Don’t try to fight it – embrace it and find opportunities to take advantage of the mispriced bonds that are created amidst the confusion. Trade around the volatility and add alpha to your portfolio, and don’t expect a perfect bracket nor a perfect portfolio.
