Nasdaq #TradeTalks: Income investing in 2021

HANDLS Indexes Co-Founder Matthew Patterson joined Jill Malandrino on Nasdaq #TradeTalks​ to discuss income investing and a vehicle designed for a predictable flow of income. To see the full interview please click here:#TradeTalks: Income investing and a vehicle designed for predictable flow of income | Nasdaq

Key Highlights:

2021 First Quarter Income Investing Recap

Interest rates took center stage in the first quarter of 2021, with the 10-year U.S. Treasury backing up from 0.93% on 12/31/2020 to 1.62% on 3/15/2020.

• Bond investors pricing in expectations of economic growth driven by a Biden stimulus package.
• Will this be the year the rising rates trade finally pays off?

The impact of rising interest rates on income investing asset categories.

• Every fixed-income asset category tracked by the Nasdaq 7HANDL Index produced negative returns in the first quarter.
• Sector shift in equities as expectations of increasing economic growth faceoff against higher discount rates associated with a steepening yield curve.
• Established companies with near-term cash flows outperforming broader market.
• High-growth companies underperforming as investors discount long-term cash flows at higher rates.

2021 Second Quarter Income Investing Outlook

Whither interest rates?

• Goldman Sachs is predicting the 10-year U.S. Treasury to hit 1.91% by year end.

However:

• Inflation expectations remain muted.
• The rising rates trade is perhaps the most crowded, least successful trade of the last decade.

The Biden tax proposal would raise taxes on corporations and high-income individuals.

• Higher corporate taxes would reduce after-tax returns on invested capital and put downward pressure on equity valuations.
• The impact on fixed-income markets is unclear.
• The likelihood of proposal passage questionable.