Municipal Bonds

Markets have been walking a fine line, with a still-struggling economy on one side and hopes for a COVID-19 vaccine breakthrough on the other. Heading into the fourth quarter, there are both encouraging signs and cause for caution.

The coronavirus shock is accelerating structural trends in inequality, globalization, macro policy and sustainability. This is fundamentally reshaping the investment landscape and will be key to investor outcomes.

Adding intangible assets to book value provides a more robust measure of firm capital. But, just as a home buyer considers a host of variables when evaluating the price of a new house, we prefer to use multiple metrics, not book value alone, to get the most complete picture possible of a firm’s valuation.

Ed Perks and Gene Podkaminer of Franklin Templeton’s Multi-Asset Solutions team discuss the attractions of alternative assets that can offer natural portfolio diversification. Over a longer-term horizon, they continue to believe global stocks have greater performance potential than global bonds, or alternatives, but this outlook will not be reached along a smooth path.

The December deadline for a Brexit deal is quickly approaching. One consequence of Brexit was that firms couldn’t plan—or they were forced to plan for a no-deal scenario. It’s a big reason why the pace of business investment was so sluggish in the years since the 2016 referendum...

Another market high, with expectations for a “V”accine-shaped recovery.

Overall, EM IG bonds represent a great opportunity for investors seeking to monetise the EM risk premium with moderate volatility in a world, where higher yielding IG-rated securities are increasingly difficult to come by.

Market crashes, such as we experienced in March at the onset of the pandemic, drive assets to the safe haven of government bonds. But our research shows this flight to safety mindset did not translate to an increase in demand for annuities.

In a challenging year dominated by the COVID-19 pandemic, the municipal market is recovering on the strength of unprecedented federal support.

There are opportunities for investors to monetize market volatility while also hedging credit risk to enhance returns and reduce correlation through a tactical approach using alternative, multi-asset strategies.

The third generation of financial planning mathematical infrastructure has emerged, which incorporates additional variables to more realistically reflect potential future outcomes.

One of our favorite natural resource companies, Ivanhoe has returned more than 146 percent in the past six months alone as investors anticipate the start of production at the Kakula Mine, which has the potential to become the world’s second-largest copper mining complex, with annual output projected to be 800,000 metric tonnes a year.

The U.S. stock market hit pause in early September, as investors took a harder look at market overconcentration and frothy sentiment. Meanwhile, global economies may be entering a new phase, and the Federal Reserve’s newly announced inflation policy is likely to keep U.S. rates lower for longer.

The Federal Reserve has changed its inflation policy. Here’s what it may mean for markets.

Resiliency and diversification potential remain critical in a world with meaningful uncertainty ahead.

Sovereign bonds have long been the prime defensive asset for multi-asset portfolios. But in today’s extraordinary market conditions, should investors make more extensive use of other defensive choices?

Market update from BlackRock's municipal bond team.

Although the pandemic could make for a chaotic return to school, it is unlikely to create significant municipal credit stress.

The snarky comments about financial engineering practically write themselves: An exchange-traded fund investing in collateralized loan obligations? What could go wrong?

Passive bond funds – particular those that track the popular Barclay’s AGG index – offer the worst risk-return profile ever, according to Jeffrey Gundlach’s DoubleLine Capital.

After a wicked stock market decline into late March and impressive 60% advance off the low, it seems a stretch to expect still higher equity prices. However, a major extension to the post March rally is definitely supported by the five reliable long-term indicators featured in this research note. Their current position is far more consistent with a major long-term buying opportunity than a selling one.

US Economy Suffered Record Losses in First Half 2020. August Jobs Report Came in Much Better Than Expected. Business Bankruptcies Jumped 26% in First Half 2020. Trump Boat Parades Across the Country on Saturday

We hear numerous market strategists talk about stocks which are going up because “there is no alternative” to owning them. In the Wall Street vernacular, this goes by the phrase TINA.

When government forces businesses to close (even if it is for a pandemic), it's a "taking" in the legal sense. And we can think about $3 trillion in extra federal spending as "just compensation" to businesses and workers for that taking. Basically, we decided to borrow from future generations in an attempt to stop a virus and save the economy.

Throughout the second half of 2020, a deterioration within the U.S. Dollar has been among the primary themes in focus, and understanding the Dollar’s impact on the positions in our portfolios is important.

The legendary fund manager, Bob Rodriguez, doesn’t like either stocks or bonds, but he explains the particular strategy he is pursuing for buying hard assets.

In a low-yield environment, advisors need to use financial planning tools like no-commission annuities to improve after-tax, after-advisory fee bond returns.

In the age of Anthony Trollope, in hindsight, the variable cash returns of common stocks and their dividends deserved greater premiums; the certainties of fixed income coupons deserved lesser ones. Our family office is betting on a similar shift in market discounting.

As against the widely touted long-run, expected real returns from equities of 6.5%, we show that the true expectation for global stocks is in the range of 4.5 to 5%.

Here’s the evidence.

Although the pandemic could make for a chaotic return to school, it is unlikely to create significant municipal credit stress.

Supply is getting tight. Helium is notoriously difficult and expensive to store, for the very good reason that it escapes every known container over time.

Different investors will choose different paths in response to the challenge of low rates and high credit uncertainty. Some may want to fight the trend by taking on more risk to achieve a target level of income or return.

While most people generally understand that the stock market and the economy do not move in lock step, there is still an underlying belief that a strong market reflects a strong economy. But according to that logic, our current economy must be historically strong.

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.

Prior to Hurricane Laura making landfall in Louisiana and the wildfires in California and parts of the West igniting, the U.S. had already experienced 10 different billion-dollar natural disasters this year.

The Georgetown professor and former PIMCO economist says democracy will have failed if the strategy continues working for decades.

Tina is an old friend of mine, but she is also a sad case of hubris, over-confidence and misguided pride. I first met Tina about 38 years ago but, more recently, I have been reminded of her presence every single day. Sometimes valuations get so much out of whack that I get goose bumps all over, and this is one of those situations.

You know it’s a bubble when you have to edit the Y axis on all of your charts because valuations have broken above every historical peak, and estimated future market returns have fallen beyond the lowest points in history, including 1929.

Bond investors face a challenging environment. The federal funds rate is back near zero, the 10-year Treasury yield remains stuck in a 0.5%-to-0.75% range, and inflation-adjusted (real) yields are deep in negative territory.

A 60/40 portfolio of global stocks and bonds has returned a respectable 8.4% annually over the past five years, but also a heartbreaking 6.2 percentage points a year less than the S&P 500. And the difference seems to be all investors care about.

Led by technology and large-cap companies, the S&P 500 is on pace to post its best summer performance in over 80 years.

Valid until the market close on September 30, 2020.

The S&P 500 closed August with a monthly gain of 7.01% after a gain of 5.51% in July. At this point, before the close on the last day of the month, all three S&P 500 strategies are signaling "invested" — unchanged from last month's triple "invested" signal. All five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), and iShares Barclays 7-10 Year Treasury (IEF), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — are signaling "invested", an increase from last month's triple "invested" signal.

In a new quarterly letter to GMO clients, head of asset allocation Ben Inker highlights the sea change in the utility of government bonds and Matt Kadnar, member of GMO’s Asset Allocation team, weighs in on today’s low bond yields.

Earlier this year, Jeremy Siegel said that, “75/25 is the new 60/40,” a recommendation to raise stock allocations to make up for lower bond yields. However, what matters for investors saving for retirement is not the asset class performance, but how those returns translate into retirement consumption.

The Fed updated its monetary policy framework, moving to a flexible average inflation target. That means that the central bank will target an average inflation rate of 2% (as measured by the PCE Price Index) over time.

Bond yields are low, but investors’ need for income is high. In this one-minute read, Tony DeSpirito offers three reasons to look to equities for income.

The move away from a precise 2% target likely means short-term rates will stay lower for longer.

The Fed is about to bestow more gifts on the market, stoking a new phase in the risk rally, according to Morgan Stanley Investment Management portfolio manager Jim Caron.

Capital markets have rebounded from their COVID-19-induced lows, but impacted industries have lagged substantially. That pessimism may be overdone in some cases, creating opportunities for multi-asset investors to exploit dislocations.

Investors flock to municipals to meet safety, income and after-tax return goals. But investors should consider how they gain exposure to the asset class.

Our total national debt today is now $26.7 trillion, the largest ever, as reported by the Treasury Department and tracked by the US Debt Clock. There is no argument over that figure. However, our total national debt is broken down into two components: “Debt Held by the Public” and “Intra-Governmental Debt.”

This November’s US presidential election pits Donald Trump against Democratic nominee Joe Biden, a longtime politician who represents a more progressive policy approach. Our Head of European Fixed Income David Zahn breaks down the implications of the US election for Europe, and why many of Biden’s policies line up more closely with European views.

Latest insights on the disruptive effects of the pandemic and what those mean for credit.

Since the inflation cocktail is closely related to value stock outperformance, we are very excited about our future value investing possibilities.

Interest rates are at extreme lows around the world, and they’ll likely stay low for some time. Does this mean US-based investors should revert to a US-only bond strategy?

Despite reaching record highs earlier this month, gold remains attractively valued, according to our framework.

In the minutes of the July 28-29 FOMC meeting, participants expected no change in policy rates anytime soon, but officials saw a need for more clarity regarding the likely path, such as adopting output-based forward guidance.

The current environment may be more uncertain and riskier than any we have seen in our lifetimes. Yet, corporate bond spreads say the future has never been more certain.

My family office has decided to take Jeffrey Gundlach’s general advice and look at the areas in common stocks that have been damaged but not supported by Fed actions.

The lodging industry illustrates a panoply of pandemic problems; and keeping people in their homes will be key to economic recovery.

The number of Americans filing for initial jobless claims this week spiked above 1 million, while the number of deaths attributed to COVID-19 remains above 1,000 a day. But there was much else to celebrate.

As a result of the Federal Reserve’s efforts to shore up credit markets, the leveraged credit sector has delivered stellar performance since the lows in March.

Berkshire unexpectedly announced that, as of the end of the second quarter, it held a $565 million position in Barrick Gold, the world’s second largest producer of the metal.

Treasury bond yields have been drifting quietly lower since early June. But there is more going on beneath the surface than it might seem at first glance. Real yields—nominal yields less inflation—have declined steeply into negative territory. While nominal yields are near record-low levels from the deep economic decline, inflation expectations are picking up.

The Absolute Capital Opportunities Fund (CAPOX) uses a flexible approach to value investing. It is sub-advised by a team at Chicago-based Kovitz, led by Mark C. Rosland and Joel D. Hirsh. As of May 31st, 2020 its cumulative return was 29.49% versus 1.03% for the HFRX equity hedge index.

In 2019, the bull market thinking of fixed income investors argued for a more disciplined approach to risk and return. The markets today are facing very different circumstances, but are suffering from the same lack of risk management.

Emerging countries have been in the midst of a crisis that is not of their own making. A great majority of these countries are navigating the crisis fairly well.

Chief Investment Officer Terri Spath discusses how the stock market continues to rise despite economic struggles, the current state of the bond market, and how our rules-based investment disciplines are navigating these unprecedented times.

Research Affiliates discusses the increase in portfolio tactical shifts and recent research efforts supporting the All Asset strategies in today’s evolving investment environment.

Investors should consider alternatives such as private credit as they search for positive yield in a world of low or negative interest rates, says Nuveen.

​​​​​​With interest rates at historically low levels, investors still have a pressing need to find reasonable income. In this upcoming webinar, Invesco’s municipal investment leaders representing mutual funds, ETFs and separately managed accounts, will discuss how advisors and investors can use different investment solutions to balance the need for income with the realities of managing risk in an uncertain climate.

This presentation will cover:

• Balancing the need for income with the importance of managing risk amid the market volatility created by the pandemic.
• The prospects for higher tax rates and the increased appeal of tax-advantaged municipal bonds, as the government looks to pay for massive stimulus packages.
• Aligning investor goals with the portfolios objective to find the right municipal income solution to meet their needs.

Initial claims for unemployment benefits fell below one million for the first time since mid-March (20 weeks). However, unadjusted claims had already dipped below that level a week earlier. Unadjusted claims totaled 831,000.

Here are two studies, conducted by Morningstar and Innovest Portfolio Solutions, which demonstrate how periodically rebalancing your portfolio can reduce downside risk, shorten the recovery time following a market downturn, and enhance return potential compared to never rebalancing.

Factor-driven investing, while highly popular among equity investors, has not been as widely adopted in the bond market. But research shows that a factor-based approach to bond investing is superior to attempting to identify top-performing active bond managers.