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Portfolio Strategy

Fixed-Income Outlook: Risk and Relative Value in a Time of Change

December 14, 2016

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

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.
 
 

Important Notices and Disclosures

This article is distributed for informational purposes only and should not be considered as investing advice or a recommendation of any particular security, strategy or investment product. This article contains opinions of the author but not necessarily those of Guggenheim Partners or its subsidiaries. The author’s opinions are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Guggenheim Partners, LLC. ©2016, Guggenheim Partners. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information.



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