Markets
(New York)
According to a poll of leading bond strategists surveyed by Reuters, there is likely to be a correction in bond markets in the next three months. The reason why is that central banks across the world are all looking for the exits from their stimulus programs. The head of strategy at Rabobank commented that “The message from Powell is: We will look through it (inflation). We're not going to jump to conclusions and that creates some calm. But you just need a couple of big surprises (in data) and things are again open to correction”. 59% of those strategists surveyed said they saw a “significant” sell-off in global bond markets coming in the next three months.
FINSUM: This all depends on timing and signaling. If the Fed makes an inadvertently hawkish statement, you could easily see a 2013-style Taper Tantrum. But if the Fed uses careful wording and guidance, the whole transition could be smooth.
Infrastructure investment has changed vastly in the last few years. Not only is the sector at...see the full story here
(Washington)
Janet Yellen shocked the markets recently in an interview where she praised the potential of higher inflation…see the full story on our partner Magnifi’s site
More...
(New York)
The municipal bond demand has spiked to a near all-time high. Prices are indicative of that, but…see the full story on our partner Magnifi’s site
(New York)
The market has been nervous for months about growing inflation in the US. The Fed has tried to appear sanguine about it, and has so far done a decent job of keeping fears in check. However, a blowout inflation report this month, as well as more hawkish comments this week, means that anxiety is rising strongly again. And according to Jeffrey Gundlach, the fears are justified as he believes inflation will not be “transitory” as central bankers have been predicting. One of his core arguments is that inflation may become a self-fulfilling prophecy, where consumers start stocking up on items now to avoid future price rises, which in turn causes shortages and drives prices higher.
FINSUM: The self-fulfilling prophecy is a good near-term argument, but we have a longer-term one: demographics. The largest generation in the history of the US—Millennials—are coming into their peak earning and buying years, which is creating demand for literally everything, and supply is tight across almost all industries. Inflation looks inevitable.
Infrastructure investment has changed vastly in the last few years. Not only is the sector at the epicenter of Biden’s stimulus packages, but “infrastructure” has evolved beyond the traditional view of buildings and transportation. Infrastructure investment now refers not only to road and rail—the literal backbone of 20th century development—but also to emerging global themes like decarbonization, clean water, and digital transformation. Further, infrastructure investment has expanded from municipal bonds to equities and other fixed income solutions. As in the past, there continue to be compelling reasons why an allocation in infrastructure makes sense for today’s portfolios:
• Consistent and stable return profile
• Strong portfolio diversifier.
• Focus on essential assets.
Why Now?
President Biden has put America’s aging infrastructure at the center of his presidency and there is a major infrastructure bill moving through Congress which we believe would provide unprecedented opportunity for investment in the sector.
But what is the best way to invest in infrastructure?
Essentially there are three routes. First, through globally listed infrastructure, which is currently trading very favorably levels*. For example, P/E ratios for infrastructure equity investments are well below those of other comparable investment profiles. Take a look at the MainStay CBRE Global Infrastructure Fund (VCRIX), a Lipper Award winning fund, to learn more.
Second, tax exempt muni bonds can be a strong and traditional option. Three-quarters of all infrastructure funding is provided by muni bonds, and the sector has generally had fewer credit downgrades than the bond market as a whole, largely because of the “essentiality” of the services that municipal issuers provide. For example, the provision of water, power, and education have not been greatly affected by recessions. An option for infrastructure investment via tax exempt muni bonds consider the IQ MacKay Municipal Intermediate ETF (MMIT), a highly rated fund by Morningstar.
Third, taxable muni bonds are an increasingly popular option which fulfil an important role in the ecosystem. Their issuance has surged since their effective inception in 2008 via Build American Bonds after the global financial crisis. They consist of largely the same issuers, but their taxable status means they can be utilized in areas where conventional muni bonds largely have not, such as qualified plans, pensions, endowments, and foundations. Check out the MainStay MacKay U.S. Infrastructure Bond Fund (MGOIX).
*Source: CBRE Clarion as of 3/31/21
All investments are subject to market risk, including possible loss of principal. Diversification does not ensure a profit or protect against a loss in a declining market.
Click on the fund name for the most current fund page, which includes the prospectus, investment objectives, performance, risk, and other important information. Returns represent past performance, which is no guarantee of future results. Current performance may be lower or higher. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost.
Please ask your clients to consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and, if available, the summary prospectus, contain this and other information about the fund and can be obtained by contacting you, the financial professional. Instruct your clients to read the prospectus or summary prospectus carefully before investing.
“New York Life Investments” is both a service mark, and the common trade name, of certain investment advisors affiliated with New York Life Insurance Company.
FOR REGISTERED REPRESENTATIVES USE ONLY - NOT FOR DISTRIBUTION TO CLIENTS OR TO THE GENERAL PUBLIC.
1903005
N.B. This is sponsored content, not FINSUM editorial.