My Comments: What’s your poison? Politics? Money? Entertainment? Sports? Religion?
Well, this post is about economics and finance. Some of you will run and hide. That’s OK. It comes from Guggenheim Investments and is a quick and dirty look at the next few months…
With spreads tight in high-yield corporate bonds, loans, structured credit, and Agency mortgage-backed securities, we expect an uptick in volatility this summer. While we see some near-term weakness ahead, our positioning, informed by the long-term themes identified in the highlights below, should provide a sound footing for our portfolios. Our Sector teams, Portfolio Managers, and Macroeconomic and Investment Research Group discuss shorter-term, sector-specific tactics for managing through current market conditions in the pages of this edition of the Fixed-Income Outlook.
▪ With the Federal Reserve (Fed) set to continue to raise interest rates—and at a faster pace than that which is priced in the market—positioning for a flattening yield curve will remain a major theme in our portfolios.
▪ In addition to two more hikes this year, we expect the Fed will raise rates four more times in 2018. The Fed is also plotting a strategy to reduce its balance sheet; this should pressure yields higher in the short end and belly of the curve, which is where most of the new Treasury issuance is likely to come.
▪ Our view on the global macroeconomic environment is positive, which should support strong credit fundamentals for several years. China has stabilized, Europe is recovering, and corporate earnings in the U.S. are rising.
▪ We are focused on the legislative complexities of passing President Trump’s pro-growth agenda. Failure to put his plans into effect in a timely manner may cause markets to realize that the Trump rally is long on promise and short on delivery.