Results for search of category: Corporate Bonds

Shooting Bad Assets

If it’s not worth the risk, sell it. Risk-efficiency matters, especially as we move into the late-cycle. Assets which are not risk-efficient should be sold. Despite the significant increase in volatility, US and EM Equities are still far more risk-efficient than any of the mainstream US fixed income categories.  [Read More... ]

If You Have to Own Bonds…

All our tactical asset allocation models are close to maximum underweight in fixed income. If you have to have some exposure, our models are clear that the best overall strategy is momentum with a bias towards risk-aversion. Other strategies tend to lead to lower returns and larger drawdowns over the long term.  [Read More... ]

The Anti-Forecast

Investors don’t need to read the outlooks for 2018 to know that they are not being adequately rewarded for holding supposedly safe assets like US Treasuries. They are effectively forced into US and international equities, because the returns generated by traditional fixed income or alternative assets are unattractive in risk-adjusted terms.  [Read More... ]

Credit Quality Concerns

While newspapers are fretting about the valuation of Technology stocks, our models suggest that there is a growing problem with US High Yield credit. This is not confined to the Energy sector and may soon impact US Investment Grade. Our previous note highlighted the importance of Investment Grade as an end of cycle indicator.  [Read More... ]

A Warning from History

There is a lot of concern that the ultra-low level of volatility may herald the death of the global equity bull market. But historically this has been a poor indicator (as have Tech bubbles). Two which have worked in the past are very low exposure to US investment grade credit and very high exposure to Eurozone Equities, both of which we have now. But the lead-time from here could be between 10-30 weeks  [Read More... ]

Comforting Conclusion

We are now very close to the all-time low on our index of multi-asset volatility, but setting a new record is not really important. What matters is how quickly we revert to the median and what leads us higher. Previous episodes suggest that the reversion takes 8-10 months, and is led by US High Yield and US REITs. The numbers also suggest that global equities could correct by 10-15% without significantly damaging investor psychology.  [Read More... ]

In Praise of Cash

US cash deposits are a neglected asset class. Our models suggest that US Treasuries, Gold and Investment Grade bonds have a low or no-better-than-evens chance of beating cash on a risk-adjusted basis. If you don’t have to own them, you should be reducing your exposure. Our numbers do not include the risk that the Fed decides to surprise on the upside in 2017.  [Read More... ]

How to Manage Falling Treasuries

We think that the best way dealing with falling Treasuries is to stay in fixed income and to seek out situations in the credit markets, which are priced for high levels of risk, and where volatility is still falling. The problem with reducing duration or buying inflation-linked bonds is that the Fed and other central banks can force you to unwind it if they want to.  [Read More... ]


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