Investment Grade Credit Update: An Exceptionally Eventful Year That Has Created Opportunities
The investment grade fixed income market has been unusually active in 2020. Initial concerns about Covid-19 triggered a sharp selloff, but sentiment abruptly reversed when the Fed announced plans to purchase corporate bonds. Spreads have nearly returned to their pre-pandemic levels, but not all sectors have recovered equally, creating interesting opportunities for savvy investors.
Gundlach – Trump will Defeat Biden; Avoid the Bond Market
Jeffrey Gundlach, who famously predicted Donald Trump’s victory in 2016, said that the president will defeat the presumptive Democratic nominee, Joe Biden, in November. He also dimmed the expectations of fixed-income investors when he said to avoid short- and long-term bonds.
CEF Yields and More
Closed-end funds are known for leveraged income generation, but yields can come from a range of sources, strategies and products. John Cole Scott, founder of the Active Investment Company Alliance and chief investment officer of CEF Advisors, offers his perspective on the current CEF landscape and challenges presented by the coronavirus, not to mention the presidential election and recession recovery. Scott also shares his excitement about the AICA online CEF conference on Aug. 13, featuring the “best and brightest” minds in the CEF industry.
Muni Closed-End Funds Update With Dave Lamb
Municipal Bond Closed-end Funds, like most investments, have felt the impact of the coronavirus-stricken economy. But Dave Lamb of Nuveen says Muni CEFs have rebounded well, especially those with higher quality credits. Despite potential concern of a recession-driven shortfall of taxes supporting munis, Lamb is optimistic about the future. He says it’s an “opportune time to invest in closed-end funds.” He expects discounts to continue to narrow and notes the low cost of leverage has helped lead many funds to increase distributions.
Earnings Season Begins with Low Expectations; Will it Be a Catalyst?
It is safe to say that expectations are low as the bottom up consensus for the S&P 500 calls for a year over year earnings decline of about 45% in the 2Q. This would be the largest year over year decline since 2008. But that is well understood at this point.
Roadblocks to Recovery
The economic calendar is a normal one and is beginning to include data from after the start of the crisis. This week includes small business and consumer sentiment surveys, as well as April data for retail sales and industrial production. I will also be watching jobless claims, both new and continuing.
Markets See Light at the End of the Tunnel: Recovery by July, Says CPLIX’s Grant
While predicting that “economic activity in March and April will be the worst of our professional careers,” Grant nonetheless says markets see light at the end of the tunnel that includes economic recovery by July.
Curb Your Enthusiasm
The economic calendar is light and provides little post-COVID19 data. Continuing jobless claims takes on a new importance, and we may get some useful information from the components of the University of Michigan sentiment survey.