For most of the last fifty years, fixed income investing has been characterized by owning some combination of Municipals, Corporates, Treasuries and Agency Mortgage-Backed Securities.
For most of the last fifty years, fixed income investing has been characterized by owning some combination of Municipals, Corporates, Treasuries and Agency Mortgage-Backed Securities which has worked well with periods of secular disinflation.
For years, the emphasis within fixed income investing has been to seek security-specific alpha in an illiquid bond market where no single security significantly impacts portfolio returns.
In what was supposed to be the “year of fixed income,” 2023 proved to be an OK year, but not a generational one. As we shift gears into 2024, spreads are tight, rates are low, and the market is pricing in a whopping six interest rate cuts before year-end.
In our latest fixed income insight, we highlight four compelling investments for the remainder of 2023 and into 2024.
A quick PSA from RBA: Beware of the coming credit crunch. The key goal of tightening monetary policy is to reduce the flow of credit. It is also important to note that the weakest links always default first. This cycle is so far no different.
Remember, the Fed hikes short-term interest rates to slow long-term growth and inflation.
We more than doubled our portfolios’ duration in a single day this summer.
Given year-to-date fixed income returns, one would be forgiven if they never wanted to own the asset class again. Such a view, however, could prove costly as, for the first time in a year, areas of the market are starting to look attractive.
Traditional long-only fixed income managers had one of the worst quarters on record in Q1 2022 as higher interest rates left “bottom up” portfolios overweight duration.
The 2s10s curve is once again knocking on the door of becoming inverted (while some curves like the 3s10s and 5s10s already are), causing quite a stir among market watchers that recession is imminent. In his latest report, Michael Contopoulos examines the 2s10s yield curve movement leading up to the past 6 times the US economy slipped into a recession and discusses what could be different this time.
We all love alliteration (hence, Rich’s favorite term to describe the Fed is “lily-livered”) but when it comes to the “Powell Put” or the “Powell Pivot,” we think investors need to understand the facts and intentions of the Federal Reserve before accepting a saying just because it rolls smoothly off the tongue.
With inflation surprising to the upside and lasting longer than most expect, we believe investors will need to rethink portfolio management and what it means to own a balanced portfolio. Michael Contopoulos's latest report addresses investors' many questions related to our view on inflation and its implications for the future.
