The Pier 88 Investment Team is constructive on the convertible bond asset class given a historically high Sharpe ratio, competitive yield, positive correlation with interest rates, risk-reward profile, and a plethora of new issuances allowing for a diversified portfolio to express thematic views.
In a “market mania,” retail investors are generally “long confidence” and “short experience” as the bubble inflates. While we often believe each “time” is different, it rarely is. It is only the outcomes that are inevitably the same.
The markets took a tumble to start last week as rising interest rates and inflationary pressures begin to weigh on outlooks. Those worries quickly diminished as Jerome Powell changed the rules to reassure Wall Street that “QE” is here to stay.
As discussed in Friday’s #Macroview, stimulus, mainly when it comes from debt, does not create organic economic growth. In the second part of this analysis, we delve into why Powell is wrong when he says more stimulus will solve the employment problem.
2021 has certainly started off interesting. From Reddit readers chasing the most heavily shorted stocks, to the new administration discussing more stimulus, investors have had plenty to deal with. A market review seems appropriate as the bulls seem to remain bulletproof even as the mania grows.
2021 has certainly started off interesting. From Reddit readers chasing the most heavily shorted stocks, to the new administration discussing more stimulus, investors have had plenty to deal with. A market review seems appropriate as the bulls seem to remain bulletproof even as the mania grows.
The Fed recognizes their ongoing monetary interventions have created financial risks in terms of asset bubbles. They are also aware that most policy tools are likely ineffective at mitigating financial risks in the future. Such leaves them being dependent on expanding their balance sheet as their primary weapon.
October was marked by continued volatility across fixed income and equity markets as investors faced various challenges, including persistent inflation concerns, rising yields, tightening monetary policy, and the backdrop of a U.S. Presidential election.
As an investor, it’s nice to know what we should expect from President Trump, because we have seen the movie before in 2017 – 2021. Apart from the early part of the Pandemic period, the economy and stock markets generally performed well.
Remember, our investment in stocks is a De facto vote of confidence on the economies in which we invest. Earnings, revenue, margins, free cash flow, and the growth of these important metrics is what drives stocks up or down over time.
The discretionary sector struggled as did all growth and quality-oriented areas of the market in 2022. That was a classic re-set and a raging opportunity to add exposure.
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