Core-plus manager Ashok Bhatia, CFA, presents his views for the core-plus bond space with the help of Dr. Brian Jacobsen, chief portfolio strategist with Wells Fargo Asset Management.
The trends are clear. 2016 was the year in which the investment community warmly embraced passive portfolios.
Municipal bond manager Lyle Fitterer provides his thoughts on sectors he’s watching as the Trump administration begins.
We need a new definition of a bear market in bonds.
The bond markets started preparing for an increase in the federal funds rate last summer, a process we have seen several times in the past.
In a surprise to most investors, myself included, high-yield bonds outperformed large-cap stocks for the year to date through November 30, 2016.
November was one of the cruelest months for the fixed income markets in modern times.
Now that the Treasury yield curve has flattened substantially from 2014’s very steep configuration, some economists and other impressionable types are worried about a recession in the next 12 months. They are citing the fact that a flat yield curve has heralded each of the previous recessions. However, they have forgotten one of the first things they learned in statistics class—never confuse correlation with causation. In past cycles, flat yield curves emerged after short-term rates moved sharply higher. In turn, they often pushed up bond yields and mortgage rates enough to create a turndown in the housing sector. That is not happening now.
The following table shows how yield curves behaved prior to the past five recessions:
John Manley and Jim Kochan, capital market strategists at Wells Fargo Asset Management, point to areas of opportunity in the equity and fixed-income markets around the globe.