Displaying items by tag: rates

(New York)

Markets are getting more volatile by the day. Last week was a rough one and yesterday was total carnage. Investors might be thinking about allocating shares into some safer sectors. With that in mind, here are 7 safe dividend payers to take shelter in: JP Morgan (2.8% yield), Sempra Energy (3.1%), NextEra Energy (2.6%), Air Products & Chemicals (2.3%), Honeywell International (1.9%), McCormick (1.5%), Microsoft (1.5%).

FINSUM: One of the big things to remember here is that with the Fed on hold, the big headwind against dividend stocks is pretty much removed.

(New York)

Bond ETFs ae set to break a landmark record this year—$1 tn in AUM. The number is a big deal for bond ETFs, which got off to a slower start than their equity counterparts. In recent years, though, bond ETFs have seen huge inflows as they allow investors a more liquid option for both strategic and longer-term allocations. The market is also seeing a good deal of innovation, with more nuanced approaches spreading much like they have in equities.

FINSUM: Overall this is excellent news for investors. More AUM means more liquidity, more options, and lower costs. There are still some fears about a liquidity mismatch between the ETF and the underlying blowing up during a crisis, but those have never materialized.

(New York)

One of the most famous names in bonds, Jeffrey Gundlach, has just put out a bold statement. Gundlach thinks there is forthcoming trouble in markets and he thinks it is the Fed’s fault. Specifically, Gundlach thinks the bond market is set for a lot of volatility. “interest rates cannot maintain the low volatility they have maintained over the last eight years”. To be clear, Gundlach is not calling for a recession, but says “But I am starting to think it is much less of a lock that there won’t be a recession before the next recession”.

FINSUM: There are two conflicting ideologies here. The Fed thinks volatility is largely an extension of the economy and policy, both of which it feels it can control to an extent. Gundlach and many other investors think there are underlying forces in the economy and markets that can only be pacified for so long. We think they are both right to an extent.

(Washington)

Investors, take a deep breath, everything about the rate outlook has changed in the last 36 hours. For the first quarter of this year, investors thought we were on an inevitable course for rate cuts as the Fed appeared highly dovish. Then the last two days happened. First, Fed chief Powell delivered a much more hawkish speech than expected, saying that the factors that were holding inflation down were just “transitory”. Then, jobs data this morning blew everyone away with 263,000 jobs created in April.

FINSUM: We think these two factors are a big deal. It is very far from clear the Fed is going to cut (we think the risks are now skewed toward a hike). What makes this worrying is that a lot of the rally this year has been predicated on a dovish Fed.

(Washington)

Something very odd is going on in the minds of investors. Data on the economy continues to come out very strongly, with Q1 growth at 3.2%, and the market are nothing short of astonishing, up 25% since its December low. But at the same time, many investors and analysts think the Fed will cut rates. The reason why is disinflation, or the fact that the inflation number refuses to rise to the Fed’s target. Looking more broadly, you also have weakening in China and a slowdown in Europe, so there are macro headwinds that could wound the US. Analysts tend to fall in one camp or the other on hikes, with some, like Scott Minerd of Guggenheim, calling the idea “plainly wrong”.

FINSUM: It is very hard to predict what the Fed will do because their u-turn earlier this year caught everyone by surprise. Our bet is that if the current data holds steady, there won’t be any hikes.