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
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.
- 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.