In 2013, the mere mention by the US Federal Reserve (Fed) that the scaling back of asset purchases could be forthcoming caused significant short-term disruptions to the global financial markets. Currently, the Fed is once again poised to scale back its asset purchases as the US economy has recovered from the latest recession. Investors are concerned that a shift in Fed policy will have an outsized impact on markets.
The strong economy and market pressure may drive companies to pay down debt.
Tax reform has incentivized companies to return their offshore cash to the US. This could create opportunities for US investment grade bonds.
Despite the near non-stop drama of the legislative process, we ended December with the Tax Cut and Jobs Act of 2017 being signed into law. What does this mean for fixed income investors? In my opinion, the news is overwhelmingly positive for the US investment grade market; here are four reasons why.