Closed End Funds

Howard Marks’s latest memo argues that investors seeking superior performance must have the courage to depart from the pack, even though doing so means accepting the risk of being wrong. Thinking differently and better than others is key to outperformance, he explains, because in investing, it’s not enough to be right.

In January Goldman Sachs projected that the FOMC would increase the federal funds rate at every other meeting (each meeting is 6 weeks apart) starting with the March meeting.

Diverse opportunities in Global Convertibles, as well as structural features, provide tailwinds to counter rising rates and equity volatility. In rising rate environments, convertibles have historically done quite well relative to longer-duration traditional fixed income investments.

Exchange-Traded Funds (ETFs) holding only Russian equities have had creations suspended and trading halted since the war in Ukraine commenced.

Markets have already reacted to the threat of a Russian invasion of Ukraine in a textbook manner akin to prior similar events that we have outlined in prior articles on January 31 and February 22.

Howard Marks’s latest memo considers one of investing’s most fundamental questions: when to sell. Howard explains that it’s foolish to sell because prices are up and because they’re down – and why, most of the time, staying invested is ultimately “the most important thing.”

We hope you enjoy the latest newsletter from Harold Evensky.

The fund is rated 5 stars in the Small Cap Growth category for the 5-Year, 3-Year, & Overall Periods. As of November 30, 2021, the fund was rated against 507 small cap growth funds in the 5-year category and 574 funds in the 3-year and overall categories, based on total returns.

Historically, fourth quarter tax loss selling of closed-end funds (“CEFs”) has been prevalent in the market. CEFs may be more susceptible to tax loss selling given they trade on a stock exchange and market prices (investor return) can deviate from underlying net asset values (“NAVs”) (fund return).

The S&P 500 index is up more than 20% so far this year, but more than 90% of its member stocks have had “correction” level drawdowns—more than 10% from a peak—at some point this year. In short, while overall stock market performance has been strong, there has been a lot of churn beneath the surface.

There are many potential advantages to investing in tax-exempt municipal bonds, but not all advisors are aware of additional strategies and investment vehicles that can help them meet muni-focused client needs.

TINA has been applied to investing. You must buy stocks because TINA. You can’t make money any other way. Just close your eyes, buy and hold forever. Or at least through a full market cycle. Frankly, I think that’s stupid.

Growth stocks have lagged cyclicals so far in 2021, but we remain steadfast in our belief that secular growth is the key to generating long-term returns. In this piece, we discuss how we find attractive opportunities in the small cap universe.

Treasury yields fell again in May and credit spreads approached recent tights as the virus continued to recede, allowing the reopening of the economy to progress. Economic data was noisy this month, largely due to base effects, but confirms the ongoing trend of renewed growth and signs of inflation.

Transitory is defined as being of brief duration, tending to pass away and not persistent

Trust is a precious commodity.

In a complete reversal from what was expected roughly a year ago, the outlook for muni issuers is much brighter.

In recent months, two investment themes have been rewarding investors with outperformance: defense sector companies and those participating in share buybacks.

A flexible bond strategy can deliver strong performance with low volatility by diversifying across global markets.

Covered call strategies can help investors manage short-term volatility and may provide better long-term outcomes while seeking to provide attractive monthly income to investors.

Treasury yields rocketed higher in February, with the move again concentrated in longer maturities. Volatility spiked as liquidity dried up in the Treasury market, especially after a very weak 7-year auction that briefly pushed 10-year Treasury yields to 1.60%. The news flow was largely the same direction: an improving economy, increased vaccine rollout with deaths and hospitalizations turning sharply lower, and a continued march toward a substantial fiscal stimulus plan.

Rob Arnott: “There hasn’t been a better time to be a value investor at any other time in my career. I look back at the tech bubble and I never thought I would see valuations stretched the way they were then. We're back to that, and then some." We invite you to revisit “Reports of Value’s Death Have Been Greatly Exaggerated” now published in the Financial Analysts Journal.

Hope is high that economic growth will accelerate as more people are vaccinated against COVID-19, but so far economic data has been lackluster. Meanwhile, bond investors are expecting inflation despite signs that the economic recovery’s momentum may be stalling. Why does everything seem so disconnected?

Treasury yields continued to march higher in January, with the move again concentrated in longer maturities. Mortgage spreads tightened slightly, while corporate bond spreads were mostly mixed. The market remains stuck between the push/pull of the prospect for greater fiscal stimulus and ongoing vaccine rollout versus continued lockdowns and the greatest one-month mortality rate since the pandemic began nearly a year ago.

Internet message boards are lighting up and certain stocks have seen some unusually dramatic price moves. David Mann, our Head of Global Exchange Traded Funds (ETFs) Capital Markets, ponders whether ETFs could be subject to similar volatility.

Inflation will likely heat up in the coming months, but not to worrying levels.

If global growth resumes in 2021, aided by the rollout of vaccines and the Fed’s continued commitment to ultra-low interest rates, some developing countries may be able to avoid default, because yield-hungry investors will continue to buy their bonds. But other countries will not be so lucky.

There are many major policy decisions that will influence the outlook—trade, energy, taxes and budget deficits, and pandemic relief. However, it’s difficult to assess how these issues will be addressed post-election, and even more unpredictable how the market will react.

Enjoy Harold Evensky's latest Newsletter.

Resiliency and diversification potential remain critical in a world with meaningful uncertainty ahead.

The investment grade fixed income market has been unusually active in 2020. Initial concerns about Covid-19 triggered a sharp selloff, but sentiment abruptly reversed when the Fed announced plans to purchase corporate bonds. Spreads have nearly returned to their pre-pandemic levels, but not all sectors have recovered equally, creating interesting opportunities for savvy investors.

It is safe to say that expectations are low as the bottom up consensus for the S&P 500 calls for a year over year earnings decline of about 45% in the 2Q. This would be the largest year over year decline since 2008. But that is well understood at this point.

Having trouble helping your clients appreciate a balanced portfolio? These charts may help.

The economic calendar is a normal one and is beginning to include data from after the start of the crisis. This week includes small business and consumer sentiment surveys, as well as April data for retail sales and industrial production. I will also be watching jobless claims, both new and continuing.

While predicting that “economic activity in March and April will be the worst of our professional careers,” Grant nonetheless says markets see light at the end of the tunnel that includes economic recovery by July.

The economic calendar is light and provides little post-COVID19 data. Continuing jobless claims takes on a new importance, and we may get some useful information from the components of the University of Michigan sentiment survey.

Closed-end funds are currently trading at a discount as equity markets have dropped. Here’s where to spot opportunities.

Matt provides a framework that he and his team use to make sense of the headlines and the price bids flashing on their monitors. His realistic, yet hopeful outlook provides a roadmap for successfully navigating this universal crisis together.

Even with all the benefits attributable to closed-end funds—intraday trading, low financing costs of leverage, ability to be fully invested, and consistent source of income—they have some idiosyncrasies that present challenges, especially during extreme volatility

Michael Grant is preparing for rebound in equities and has positioned the long/short portfolio accordingly. To use a Wayne Gretzky analogy, he is skating to where the puck will be, not where it is.

During these turbulent times, how does one track and value the performance of an exchange-traded fund? David Mann, Head of Capital Markets, Global Exchange-Traded Funds, opines on ways to “keep score.”

Municipal closed-end funds (“CEFs”) currently offer high levels of tax advantaged income and can often be purchased at a discount to their current net asset value.