The concept of rising interest rates is one that investors have been worried about for many years. While we have yet to experience an extended period of rising Treasury bond yields in the last several decades, that hasn’t tampered fears of how such an event would unfold and to what magnitude.
Interest rates, like stocks or commodities, go through cycles of rising and falling trends that can have a pronounced impact on your portfolio returns. Fixed-income assets experience the highest level of inverse correlation with interest rates. However, there is also an undeniable impact on certain stock market sectors as well.
I’ve always been a big fan of actively managed bond funds as a way for investors to access risk managed or alpha-generating strategies. Unlike active stock pickers, the best managers from the likes of PIMCO, DoubleLine, Guggenheim, and Loomis Sayles have proven track records of adding value for their investors versus a passive benchmark. Fixed-income is still one of those asset classes where sector positioning, duration targeting, and credit selection can make a huge impact on net returns.
Look back through my blog and you will see numerous references to some of my favorite funds like the DoubleLine Total Return Bond Fund (DBLTX) or the PIMCO Income Fund (PONDX). We have owned both for our clients and in our own accounts for years. Read more
In this month’s video, I look at the technical trends developing in stocks and bonds. Chart review includes analysis of large-cap, small cap, international, Treasury bonds, and gold prices. Observations of risk and reward are noted throughout with an emphasis on moving averages as a source of support or resistance. Recorded on April 11, 2017.
Forecasting the direction of the markets on a quarter by quarter basis is no easy feat. There are simply too many unknowns to determine exactly what will happen and how investors will react to future events on both a micro and macro level. Nevertheless, a look back at recent price action and examining seasonal trends can be helpful to frame expectations. It may also elevate the need for closer examination of your existing holdings and offer consideration for changes to reduce risk or capitalize on fresh opportunities. Read more
Preferred stocks offer the distinction of being unique hybrid instruments with qualities of both stocks and bonds. In that manner, they offer healthy dividend yields alongside a favored position in the capital structure of many companies that issue these securities.
The reason company’s issue preferred shares are to raise capital from investors that are seeking an attractive yield without adding traditional debt (bonds) that carry strict maturity dates and covenants. Preferred stocks can also be “callable” from the issuer, who has the right to redeem them at a certain price or time at their discretion. Read more