Displaying items by tag: yields

Friday, 19 October 2018 09:51

Short-term Bonds Look Like a Good Buy

(New York)

Short-term bonds are looking like an ever better buy right now. Two-year Treasury yields are at 2.87%, up from 1.55% a year ago, and well over the 1.9% average yield of the S&P 500. That means the spread between the two- and ten-year notes is only about 28 basis points. Considering the latter has significantly more rate risk, two-year bonds like a good bet right now.


FINSUM: There are many ultra short-term bond funds out there to choose from. Actually, given the breadth of ETFs in the space, there has never been a better or cheaper time to play defense in this kind of rate environment.

Published in Bonds: Treasuries
Friday, 19 October 2018 09:50

A Very Strong REIT with a Good Yield

(New York)

How does a REIT with great long-term business fundamentals and eye-popping yields sound? If that sounds good, take a look at Ventas. The REIT owns 1,200 properties, many focused on senior and assisted-living facilities. The long-term business looks very healthy as demographics—including retiring Baby Boomers—are a major growth opportunity for the REIT. The dividend yield is a strong 5.7%, and it appears safe, according to Morningstar.


FINSUM: Definitely seems like a REIT worth some more investigation. We like the combination of good yield and strong long-term fundamentals.

Published in Eq: Real Estate
Friday, 19 October 2018 09:49

Is it Time to Worry About Recession?

(New York)

The markets took another dive yesterday, with the Dow losing well over a 1%, the S&P 500 down almost 1.5% and the Nasdaq down over 2%. That loss jolted investors out of the sense that things might be back to normal after a strong recovery in recent days. This all begs the question of whether it is really time to start worrying about a recession? A new study from Bank of America says no. The bank did analysis of economic performance going back to the sixties and have found that compared to previous pre-recession cycles, the US is actually moving away from recession now.


FINSUM: Relying on historical data is probably not going to be very fruitful right now as the pretext (artificially low rates etc.) is totally different for this economic cycle.

Published in Eq: Total Market
Friday, 12 October 2018 09:05

This is Where Stocks are Headed

(New York)

We have just experienced a major market rout. Stocks are off over 5% in the last two days, largely because of almost esoteric worries about rising rates. The big question for investors is “where do we go from here?”. Well the Financial Times has tried to answer the question, and their answer is pretty simple—higher. The paper thinks this tumult will prove short-lived as they contend that it is really recession that ends bull markets, and the US isn’t anywhere near one right now. They suspect corporate earnings will come in strong in the next month and right the market ship.


FINSUM: We agree that this seems like the most likely outcome of the current rout, especially given the strength of the economy. However, we do have an outside worry that investors’ minds are finally changing about the risk/reward of stocks given rising rates and a toppy-looking economy.

Published in Eq: Total Market
Friday, 12 October 2018 09:04

How the Pros are Hedging Against Rate Rises

(New York)

We have been running a lot of stories lately about the best investments for a rising rate environment. The reasons are obvious. However, instead of pointing out ETFs for allocation etc, we found a good piece interviewing money managers about how they are handling their portfolios. Some of those interviewed are relying on short-term bonds to minimize their rate risk. Since the yield curve is quite flat, you get almost no extra compensation for the rate risk of holding longer maturity bonds. One manager highlighted that bonds in the 2-5 year window were a sweet spot. Some also said the market is over-discounting inflation and that inflation linked assets were a good idea.


FINSUM: Short-term bonds seem a like good play, but we have also been impressed with the interest rate hedged ETFs out there, which often go long corporate bonds and short Treasuries to offset any losses. They seem to have performed well.

Published in Bonds: Total Market
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