Written by David Fabian, March 30th, 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
Written by David Fabian, March 13th, 2017
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
Written by David Fabian, January 06th, 2017
A reader recently sent me a question asking why you would own a bond fund when interest rates are on the move higher. This type of sentiment is more than likely on the minds of many investors as they prepare for 2017 and evaluate adjustments to their asset allocation.
The short answer is that every diversified portfolio should have bond exposure to balance out the risk of other asset classes – i.e. stocks and commodities. Bonds have historically provided a shock absorber for the equity side of the portfolio and have not shown any signs of relinquishing that trait. Simply letting go of all your bond exposure will unnecessarily tilt your risks and returns towards a single outcome. Read more
Written by David Fabian, December 11th, 2016
Income investors are currently facing an uptick of concern over bond holdings that is reminiscent of the 2013 taper tantrum. While it was no more than a few years ago, many are quick to forget the terror that resulted from a sharp rise in Treasury yields and concomitant fall in bond prices. I can also starkly remember just how wrong 99% of economists were on predicting the future direction of interest rates in 2014 and beyond. Read more
Written by David Fabian, November 29th, 2016
The nature of investing is one that we are constantly looking in the rear-view mirror to anticipate what our expectations are for the future. This often leads to considerable hopes that existing trends will extend indefinitely or that we will be able to easily spot any rough spots on the road ahead.
Bond investors have likely felt a sense of building confidence over the years as low volatility and global risk aversion have buoyed fixed-income prices. The relative consistency of capital growth, coupled with the “lower for longer” outlook of interest rates, has created a complacent atmosphere overall.