The Loomis Sayles Core Plus Fixed Income Team shares their thoughts on the potential for downgrades in the BBB debt market and dialing up portfolio risk.
In March, the Loomis Sayles Global Fixed Income Team anticipated the economy could experience sluggish growth in the third quarter after a downturn in the second. Given the ongoing vagaries of quarantines and shutdowns, how has their growth outlook changed?
The municipal fixed income market, like most other asset classes, is experiencing unprecedented volatility. Large mutual fund outflows are adding to the volatility as investors seek to add to cash reserves by selling what may be deemed easiest to sell.
On Thursday, March 12, Rick Raczkowski, co-lead portfolio manager of Core Plus Fixed Income participated in a conference call with clients to discuss recent events and market activity. He discussed that while there is a lot of fear and uncertainty in the market right now he and co-lead portfolio manager Peter Palfrey, are maintaining their discipline of managing through the cycle as they have for the past 20 years.
On Friday, March 13, Loomis Sayles’ Global Fixed Income team held a conference call to discuss the current market environment, policy responses and potential opportunities. Here, portfolio managers Lynda Schweitzer and Scott Service summarized a few key points.
The fourth quarter will provide critical insight into the near-term direction of the US-China trade conflict as well as into whether the Fed will maintain the narrative of a mid-cycle monetary policy adjustment or switch to acknowledging an outright easing cycle.
The outperformance of defensive sectors relative to cyclicals is looking extreme in Europe, suggesting the macro trade around bond-sensitive stocks may have stretched too far.
Studies have shown over the years that most economic rate projections are terribly inaccurate with forecasts bunched together from crowd behavior. So what to do? Run multiple scenarios, assign probabilities and spit out the most likely base case at that point in time.
Bond investing is going digital. Find out how fixed-income managers who are integrating technology into their processes will be able to move from great ideas to executed trades faster and with better results than those who stick with the analog status quo.
What shouldn’t you do as the Federal Reserve tightens policy? You shouldn’t be passive. Passive muni investors suffer from the painful phenomenon of clipped wings. That’s when passive strategies can’t rapidly reinvest in higher-yielding securities as rates climb, unlike their more nimble, actively investing cousins.
On the surface, passive municipal ladders seem like a sensible investment. Simple. Easy. Cheap. But the numbers don’t lie.
Looking for a strong defense against rising US interest rates? Look no further.