After being asked about the timing of the next recession during his interview with Yahoo Finance, Jeffrey Gundlach said that while the global stock market (ACWI) peaked on January 26, 2018, US markets (SPY) hung on until October.
In Bank of America Merrill Lynch’s February 2019 survey, trade war concerns remained the top tail risk cited by global fund managers for the ninth consecutive month.
If we turn back the clock to before the recession, we find that US debt levels weren’t this high, and unconventional programs like quantitative easing helped the economy recover from the Great Recession.
The report from the Joint Committee on Taxation included an estimate of budgetary deficits for 2018–2027. Tax reforms could have a limited impact in 2018.
VanEck Higher Yield and Lower Duration Compared to U.S. high yield bonds, emerging markets high yield bonds offered a 90 bps yield pickup as of June 30, 2017.[1.U.S. high yield bonds and emerging markets high yield bonds are represented by BofA Merrill Lynch US High Yield Index and BofA Merrill Lynch Diversified HY US Emerging […]
Since fallen angel bonds were given investment-grade status earlier, they typically have higher credit quality than most other speculative-grade bonds.
VanEck Given these uncertainties, high yield bond investors may want to ratchet up the credit quality of their portfolios. Fallen angels can be a source of higher quality high yield for investors, given about 77% of the universe was concentrated in BB-rated bonds (just one ratings notch below investment grade) as of April 30, 2017.[2.Composite […]
AB Keeping Pace with Equity Returns over Time In fact, when we widen the lens to take in the last three decades, high-yield bonds have nearly matched equity performance. And they’ve done it with much lower volatility. Since July 1983, stocks have produced an annualized return of 10.9% (Display 1). High-yield bonds have nearly equaled […]
AB Summing It Up High-yield bonds present an alternative for investors at an uncertain crossroads. Equity valuations seem attractive based on some measures, but volatility has led many investors to search for ways to temper the risk in their portfolios. At the same time, bonds—a popular risk reducer—are less attractive than normal due to extremely […]
AB Is This a Global Story? In our view, designing a high-yield allocation today should involve a global perspective. Our analysis focuses on US high-yield bonds, in large part because this market provides a lengthier historical data set than other high-yield markets do. But the global market for high-yield bonds continues to expand and evolve: […]
AB Are Rising Rates a Risk? Investors thinking about introducing high-yield bonds into an asset allocation might ask if it’s the right time to invest in them. With interest rates at historic lows, won’t there be substantial risk to high-yield bonds when rates begin to rise again? It’s a fair question, and there are risks […]
AB High Yield in the Portfolio Framework Given their higher risk levels, we’d expect that stocks would continue to outperform high yield over the long run. However, high-yield bonds have clearly demonstrated that they bring much to the table if they’re combined with stocks in a carefully designed and maintained portfolio. But not every investor […]
AB Rebalancing in the Tails Because stocks have been so much more volatile than high yield, periodic portfolio rebalancing tends to occur during performance extremes—the “tails” in return distributions—when the gap between high-yield and equity returns is wide. This magnifies the “buy-low, sell-high” effect that rebalancing contributes to a portfolio’s performance. Of course, the gaps […]
AB A Place at the Asset-Allocation Table For investors seeking to control volatility in their equity portfolios while still maintaining return potential, high-yield bonds could represent an effective solution. A typical approach to moderating equity volatility is to reallocate assets to the greater stability of investment-grade bonds, or even cash. But this can exact a […]
AB Looks Are Deceiving But even though high-yield bonds look like other bonds, they don’t necessarily act like other bonds. This insight can have important implications for how investors consider them in an overall portfolio context. High-yield performance patterns, for example, don’t track those of other fixed-income sectors very closely over the long term. Looking […]
Gold and oil are good hedges against inflation. While gold usually outperforms, if inflation rates rise along with interest rates, it might gain as much.
Negative bond yields in Japan and low Fed funds rates in the United States and the Eurozone were one reason emerging market bonds performed well in 2016.
Long-Term Outlook Remains Positive for Gold Bull Market Our view on the long-term gold price is unchanged. We see the recent weakness as a consolidation phase within what we believe is the early stages of the next bull market for gold. We continue to believe dislocations created by the unconventional policies being implemented by central […]
Long-Term Outlook Remains Positive for Gold Bull Market Our view on the long-term gold price is unchanged. We see the recent weakness as a consolidation phase within what we believe is the early stages of the next bull market for gold. We continue to believe dislocations created by the unconventional policies being implemented by central […]
Higher Rates Not Always Negative for Gold A Fed rate hike in December appears almost fully priced in already. The common argument is that higher rates are negative for gold given that it is a non-yielding asset. Yet, following the first rate hike of the current tightening cycle in December 2015, gold has advanced more […]
Negative bond yields in Japan and the Eurozone, coupled with very low federal funds rates in the United States, are part of why emerging market bonds and currencies have performed so well in 2016.
Investors have once again flocked to bonds, the Japanese yen, and gold due to the 10.0% fall in China’s exports and concerns over a major rejig by the central banks.
High-yield bonds gained popularity due to higher yields compared to Treasury bonds, whose yields were being pushed down by the Fed’s interest rate policy.
The December 2015 rate hike was the first since the 2008 global meltdown. Now the Fed is hinting at the first rate hike of the year to come in December 2016.
In this series, we’ll see why emerging market bonds are looking attractive, how the Market has gained position this year, and the risks emerging market bond investors face.
A QE program doesn’t just create inflation; it causes asset prices to rise as well. After the financial crisis of 2008, the Fed resorted to an ultra-accommodative monetary policy.
The three US stock indexes that we review in this weekly series rose from July 5–12, 2016. Robust US jobs data boosted investor sentiment and eased the fear of an economic slowdown.
Investor flows into high-yield bond funds were negative last week. According to Lipper, net outflows from high-yield bond funds totaled $562 million in the week ended May 25, 2016.
Investor flows into high yield bond funds were negative last week for the second consecutive week. Net outflows from high yield bond funds totaled $1.9 billion.
Investor flows into high-yield bond funds were positive last week. Net inflows from high-yield bond funds totaled $296 million in the week ending April 27.
Widening spreads indicate a slowing economy. Since companies are more likely to default in a slowing economy, credit risk related to their bonds rises.
Investor flows into high-yield bond funds were positive last week. Net inflows from high-yield bond funds totaled $410 million in the week ending April 20.
The sharp decline in crude oil prices led to defaults among high-yield bond issuers from the energy sector. Exposure to the bonds hurt funds that invest in them.
Yields on high yield bonds, as measured by the BofA Merrill Lynch US High Yield Master II Effective Yield, have fallen since early March. They ended March 15 at 8.39%.
Preferred stocks have typically seen the highest yields in the investment-grade universe, which makes them an attractive alternative to other high yielding securities.
Bonds and stocks are negatively correlated. This is why bonds can act as a ballast in your portfolio, and thus the case for bonds is still strong while building with buffer.
Credit markets tend to improve when the economy is improving. The possibility of a default on corporate bonds (LQD) drops, thus causing their yields to fall.
Adding bonds across credit classes helps diversify your bond portfolio. The weight of each category depends on your risk appetite and the business cycle.
The high volatility regime will likely be the norm in the future. State Street observed that the US market has already clocked 42 highly volatile days in 2015.
Altice N.V. issued $4.8 billion in junk bonds on September 25 in a three-tranche issue. The same day, Olin Corp. issued $1.22 billion in junk bonds in two tranches.
While higher volatility is here for the foreseeable future, the selloff has created a number of potential opportunities for investors with longer-term holding periods.
High-yield bond issuance has clearly fallen as 2015 has progressed. For most of the first five months of 2015, issues related to refinancing needs dominated the primary market for high-yield bonds.
Investors should note that high-yield bonds are risky securities to begin with. The add-on risk of widening spreads may not suit all types of investors.
According to data from S&P Capital IQ/LCD, the US leveraged loans market saw an allocation of $10 billion worth of senior loans in the week to August 7.
The US leveraged loans market saw an allocation of $16.2 billion in senior loans in the week ending July 31. This was sharply higher than the $9.3 billion priced in the week ended July 24.
Junk bond issuance activity was subdued in the week ended July 31 as issuers remained wary of the volatility in the commodities markets and the fall in Chinese equities.
Junk bond issuers returned to the primary market in the week ended July 17 as the situation in Greece stabilized, but remained cautious due to market volatility.
Junk bond issuance in 2Q15 began on a strong note in April but tapered off in June with the lowest issuance in 2015 so far. ZF Friedrichshafen issued Ba2/BB rated dollar-denominated junk bonds worth $3.5 billion in April.
If you had to sum up investing in the US markets after the Great Recession in a few words, you would probably say something like “the quest for yield.”
Although the quantum of issuance rose in the week ended June 26, it was still lower than earlier in 2015, as yields have run up quite a bit. Most junk bond issuers were Caa/B rated.
Investors should focus on dividend growth equities (IYLD) for alternative sources of income. Dividend-paying stocks can act as a cushion in this low-yield world.
