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Risk and Relative Value in a Time of Change

In our fourth quarter 2016 report, investment team leaders discuss market conditions heading into a new administration and likely Fed rate hikes.

December 14, 2016


Report Highlights

The surprise end to the fractious U.S. election season leaves many questions unanswered, but we remain alert to the possible impact of resurgent fiscal policy. Several market positives should support asset performance into 2017. The domestic economy just turned in the highest growth rate in two years, early indications point to a strong Christmas selling season, corporate earnings are turning higher or recovering, and the energy sector is stabilizing with the oil market recovery. An investor’s best option in an environment like this is to sell into strength and buy on weakness.

  • We believe it is highly likely the Fed will raise rates three, and possibly four, times in 2017.
  • A tightening labor market, rising inflation, and a new administration suggest higher economic growth and inflation, upward pressure on rates, and Fed rate hikes.
  • We continue to see strong demand from foreign investors hungry for yield supporting the investment-grade market.
  • Spreads on collateralized loan obligations have tightened significantly, particularly as investors have been allocating more to floating rate assets.
  • Rising pension liabilities remain a concern, but strong technicals support the municipal market.
 
 

FEATURED PERSPECTIVES

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March 22, 2022

For Lessons on Fighting Inflation, Skip Over Volcker to 1946

Clues from history on how to successfully end the current surge in prices.

March 04, 2022

Credit Returns in the Upcoming Fed Hiking Cycle

Exploring the performance of leveraged credit in past tightening cycles.


VIDEOS AND PODCASTS

First Quarter 2022 Market Outlook 

First Quarter 2022 Market Outlook

Maria Giraldo, CFA, Managing Director, Investment Research, and Evan Serdensky, Director, Portfolio Management, provide our macro and markets outlook.

Macro Markets Podcast 

Macro Markets Podcast: Episode #13: The Fed, Credit Quality, and Bank Loans

U.S. Economist Matt Bush analyzes the latest Fed announcement and labor and inflation data, Investment Strategist Maria Giraldo discusses credit risk while the Fed tightens, and Managing Director Chris Keywork updates on the bank loan market.







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