Managing Bond Risks When Interest Rates Rise
Rising interest rates should not affect the return on a bond you hold to maturity, but may affect the price of a bond you want to sell on the secondary market before it reaches maturity. Mutual funds, ETFs, and UITs are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before […]
The Fed Pivots to Fight Inflation
On December 15, 2021, the Federal Open Market Committee (FOMC) of the Federal Reserve System made a significant shift in monetary policy in response to rising inflation. The Committee accelerated the reduction of its bond-buying program in order to tighten the money supply and projected three increases in the benchmark federal funds rate in 2022, […]
The Coronavirus Stock Market Panic
Stock markets continue to be under pressure today after the U.S. announced additional travel restrictions with Europe. The number of confirmed cases continues to be very small, the health impact minimal and the death rate tiny according to the John Hopkins Coronavirus resource center. It appears this will become a very manageable situation. We need […]
COVID-19 and the Stock Market
Stock markets are in a tailspin this morning due to COVID-19 concerns. The stock market has dealt with many epidemics (SARS, MERS, Bird Flu, Ebola, etc.) in the past few decades none of which have led to a sustained market decline. Here is a look at the historical market returns 6 & 12-months after the occurrence of […]
REPO Market Update
Back in September the market received a warning from the REPO market where interest rates unexpectedly spiked higher. Before describing what may be interfering with REPO market operations, I want to point out that signals from the bond market, while important, generally represent a time horizon of a year or more. Unlike other technical, fundamental, […]
Collateral Damage
I have become aware of new information about what may be preventing the REPO market from operating properly. Despite emergency Fed intervention, the REPO market continues to have trouble meeting cash demands. It may not be a liquidity problem after all, it appears to be a problem with collateral. The following example from Fed Governor […]
A Divided Market
There are clearly opposite views on the market right now. After a fabulous day for all three indexes yesterday, not to mention the performance of many leading stocks, some commentators remain committed to the idea we are headed for a recession. A week ago, recession fears were plastered on the front pages of all the […]
Stocks Turn Bearish
The investment environment continues to deteriorate despite the pickup in economic activity in the U.S. the last couple of years. As the Big Four Indicators I highlighted recently show, the U.S. economy continues to move in the right direction. Despite the U.S. economy doing well, international economies are performing poorly with few catalysts outside of […]
The Grind To Lower Valuations
Let’s think about the future for a moment. After all, that is what the stock market is doing constantly. Up to this point in 2018, the stock market has had a very positive view of the future. Why wouldn’t it? Corporate sales and earnings growth have delivered in the strongest economy since 2008. In addition to an […]
Are Cracks Forming in the High-Yield Bond Market?
While high-yields bonds (HYG) have held up better than equities, there are signs of cracks forming. Negative developments at GE have caused some to speculate more highly leveraged borrowers are looking at downgrades. The lower tiers of investment grade ratings currently represent a large number of bonds and if we see a series of downgrades […]
