Not long ago, we suggested that investors who wanted to make their equity portfolios less volatile add a dash of high-yield bonds. There’s a similar low-volatility strategy available to high-yield investors: shorten duration and focus on quality.
The majority of U.S. economic data are based on statistical samples and the various figures are typically adjusted for seasonal variation. That means that the numbers are subject to some level of uncertainty.
In December, the US Federal Reserve (Fed) raised interest rates, as predicted, and raised expectations for more increases in 2017. At Invesco Fixed Income, we believe one of the best ways to handle a rising interest rate environment is to have a portfolio diversified across different credit-related asset classes.
Closed-end funds present potential opportunities to investors this year despite “rate hikes on the horizon,” CEF professionals say..
Jesse Livermore was one of the legendary icons of Wall Street speculation. Known as the “boy plunger,” because he began trading at the tender age of 14, he was subsequently banned from many “bucket shops” for winning too often. Therefore, he moved to New York City to swing in the big leagues.
The Fed’s signals that rate increases could soon come seem to fall on deaf ears. U.S. stocks continue to climb as bond yields decline. Although recent data reflect accelerating economic growth, which is necessary to justify frothy valuations, structural challenges and unclear policy outcomes remain. Caveat emptor.
Citing an improving economy and the possibility of more spending and lower taxes from the Trump administration, Fed officials are signaling rising rates immediately ahead.
This week I was in beautiful Argentina with a diverse team of investors and mining executives. Together we toured various natural gas and crude oil mining projects in Tierra del Fuego, Mendoza and Santa Cruz, where we had the opportunity to speak with Governor Alicia Kirchner, elder sister to former Argentinian president Néstor Kirchner.
The 5 MLPs covered in this article offer yields ranging from 5.7% to 10.7%. Additionally, each of these MLPs appears reasonably valued given their high yields and prospects for growth. However, two of these MLPs are currently in the process of merging.
There has rarely been a new presidential administration in the history of the United States that has tried to get so much done in its first ten days as the current one.
Why worry about paying a premium for bonds? While cash flows may differ, income from premium and par bonds is equivalent, all other variables being equal. Purchase premiums aren’t lost when the bonds mature.
Equity markets have increased since the U.S. elections for two principal reasons: optimism over a pro-growth legislative agenda from Donald Trump and improving U.S. and global economic and earnings growth.
We sipped the QE juice and loved the taste. Now we’re full… the game has changed. The Fed had assets worth $858 billion on its books in the week ended August 1, 2007 just before the start of the financial crisis, and the same stood at $2.24 trillion at the end of 2009.
Inflation just got another jolt, rising as much as 2.5 percent year-over-year in January, the highest such rate since March 2012. Led by higher gasoline, rent and health care costs, consumer prices have now advanced for the sixth straight month. In addition, January is the second straight month for rates to be above the Federal Reserve’s target of 2 percent.
The rally in value stocks may have stalled, but Russ discusses why the trend still has further to go.
For all that political events and speculation about policy direction have dominated news cycles over recent months, the US economy’s key fundamentals have changed remarkably little, in our view. The backdrop appears to us to be constructive, as a healthy level of consumer spending has been increasingly reinforced by a recovery in corporate earnings and investment.
In the month of January, the most important factor correlation to performance of developed market stocks has been dividend yield (DY).
Optimism towards the economy has surged to a 2-year high. Cash remains in favor (a positive) but global equity allocations are back above neutral for the first time since late 2015. Another push higher and excessive bullish sentiment will become a headwind.
Surprising many investors and pundits alike, the S&P 500 posted a solid return for 2016, finishing the year up close to 10%. If investors never looked at their statements, one might be naïve to how much markets zigged and zagged throughout the year.
These are uncertain times in markets, and that creates a dilemma for investors who need high levels of income but can’t stomach a high level of risk. We have a solution. Actually, we have two.
If there’s one word that characterizes 2016, it’s drama. That goes for last year’s politics, sports and even investments—last year, almost every corner of the global financial market experienced some kind of dramatic reversal, from U.S. stock markets to global bond markets, from crude oil prices to gold prices.
As has been the case for the past couple of months, investors continued to be highly attuned to the political backdrop last week. Early in the week, concerns over the president’s immigration and trade policies cased unease, but sentiment improved on Thursday after Donald Trump signaled a near-term announcement on tax reform.
Confucius wrote, “The green reed which bends in the wind is stronger than the mighty oak which breaks in a storm.” We believe that, similarly, municipal investors who choose flexible mandates will be well equipped for any type of weather.
The Fed could contain inflation fears in the bond market by taking a more hawkish stance.
Fresh concerns about Greece’s debts have prompted new worries across Europe. But another compromise looks likely—European leaders can ill afford a full-blown Greek crisis amid so much regional political uncertainty.
Floating rate bank loans, which are typically the most senior debt in an issuer’s capital structure, have traditionally been considered more resilient than high yield bonds in the event of default.
The 2016 presidential election has brought about widely anticipated changes in fiscal policy actions.
After the run-up in the fourth quarter, both TIPS and comparable maturity Treasurys delivered positive returns during the first month of 2017. According to my estimates, TIPS posted a monthly return of 0.7%, modestly better than the 0.3% return on comparable maturity Treasurys.
After underperforming in 2016, growth stocks have once again started to outperform value stocks in 2017. As the chart below illustrates, the S&P 500 Value Index consistently outperformed the S&P 500 Growth Index from 2002-2006.
I think a lot about happiness - what makes a person happy, whether or not happiness should even be a life's priority - things like that. A good high school friend stunned me at the early age of 17 by suggesting we should not necessarily try to be happy. Sacrifice, service, devotion to a cause were higher orders, he felt, although presumably, since those were choices, their pursuit could secondarily lead to happiness.
Last week I shared a chart with you that’s done a good job at signaling inflation. We tend to react slowly to news and, over time, we wake up. Then we herd in and out. In the “waking up” category, we better keep rising inflation on our radar.
After little more than two weeks, President Donald Trump’s honeymoon with Wall Street appears to have been put on hold—for the moment, at least—with major indices making only tepid moves since his January 20 inauguration. That includes the small-cap Russell 2000 Index, which surged in the days following Election Day on hopes that Trump’s pledge to roll back regulations and lower corporate taxes would benefit domestic small businesses the most.
Rising rates are typically good for stocks, especially when they’re rising because of a strengthening economy. That should mean better days ahead for many post crisis laggards. But a lot will depend on how inflation behaves.
Ahead of Thursday’s quarterly Inflation Report, the Bank of England’s Monetary Policy Committee (MPC) faced a relatively tricky challenge.
“There are decades where nothing happens; and there are weeks when decades happen.” —Vladimir Lenin The reflation move since November has been aggressive but appears more right than wrong.
Trey Reik, senior portfolio manager at Sprott Asset Management, discusses the outlook for gold in 2017 and five major variables that will affect the gold market: Fed policy, the US dollar, 10-year Treasury yields, US economic performance, and US equity risk premiums.
Earlier this month, David Zahn, head of European Fixed Income, Franklin Templeton Fixed Income Group, set out some thoughts on the political and economic landscape for Europe in 2017.
Over the last eight years, with US interest rates at rock bottom thanks to the Fed, the rest of the world has borrowed a huge amount of dollars – about $4 trillion according to the Bank for International Settlements. During that same time, the US dollar has soared against a basket of foreign currencies.
You knew the protectionist measures would come. You just didn’t know how soon they would be implemented and how disruptive they could be. A border trade war with Mexico could mean some very expensive items in the produce aisles offset by a glut of beef, pigs and cheese in the U.S.
Interest rate spreads may be more important than rising interest rates when it comes to impact on closed-end fund distributions, says Mike Taggart of Nuveen.
This week’s letter is going to be an examination of academic economics today and why it fails to explain reality, and I’ll point readers in a direction that can offer a more fruitful explanation of how the economy really works. I readily accept that I will be drummed out of most economists’ Lamb’s Book of Life for espousing too many heresies of the first order. I should hasten to say that much economic research is quite useful and does help to explain how the world works. It is just certain specific branches of economics that have been problematic, but these are the branches that have most influenced government and Federal Reserve policy.
The world is changing for investors but we believe it's largely in a positive way, although there will be bumps along the way. The recent sideways equity movement was a healthy consolidation of the post-election gains, and we suggest investors add to U.S. equity positions as needed at the expense of some developed market international exposure. Inflation is ticking higher, and the Fed is becoming more hawkish, but the conditions supporting those moves are also positive supports for stock.
Can Mr. Trump perform miracles? How can we indulge in meaningful speculation about the unforecastable? The President-elect does have some relevant experience — running companies with mountains of debt.
GMO Quarterly Letter by Ben Inker and Jeremy Grantham
Capitalism and democracy work together to power economic growth and sustain our standard of living; capitalism, with all of its faults, is still the best generator of investment and human capital in the world.
Investors excited by the boost the US election gave to US stocks should recall that starting conditions matter. This is not 1981, the beginning of the Reagan era.
In his roundup of our latest Investment Forum, Neil Dwane, Global Strategist for Allianz Global Investors, highlights the top themes driving markets and economies – including China’s growing role in global indices, Trump’s ability to disrupt the status quo, Europe’s super-election cycle and the “hunt for income” going global.
Faced with a Tweeter-in-chief, how are investors to navigate what’s ahead? Is there a strategy behind President Trump’s outbursts; and if so, how shall investors position themselves to protect their portfolios or profit from it?
One of the greatest strengths of American capitalism is how it addresses the problems faced by its citizens. The greater the problem, and the more lives impacted by the problem, the more entrepreneurs, academics and government officials there are seeking solutions.
