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Fixed Income Insights
2021 Market GPS: Fixed Income Outlook
Market behaviour in 2020 was all about flows: liquidity flooding the markets, a disease travelling through the population, global supply chains reconfiguring, and technology streaming work and entertainment to the masses. Jim Cielinski, Global Head of Fixed Income at Janus Henderson, explains that fixed income is sensitive to flows, and their direction in 2021 will help determine how the asset class navigates the year ahead.
Fixed Income Insights
The Shape of Credit
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In this Q&A, Portfolio Managers Jason England, Nick Maroutsos and Dan Siluk discuss the factors shaping credit markets, from central bank support to potential resilience from financials.
Key Takeaways
- Corporate earnings and cash flows are under strain, but while defaults are likely to increase, they should continue to be largely contained to sub-investment-grade issuers.
- Massive and proactive central bank support measures have injected confidence into markets, but this does not preclude sporadic bouts of future volatility and warrants a selective approach.
- We believe more resilient opportunities are likely to be found in higher-quality, shorter-dated investment-grade issues and continue to favor financial sector bonds and corporates with defensive attributes.
Fixed Income Insights
Building Bond Portfolios on a Strong Housing Market
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Conventional wisdom would suggest that rising unemployment would have discouraged consumers from making large contractual obligations like buying a new home, but the pandemic has affected the way many Americans think about housing. Portfolio Managers John Kerschner and Nick Childs discuss why this is happening and what it could mean for bond investors.
Investing Ideas
Securitized Market Overview
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Securitizations are financial instruments created via the bundling of contractual debts, such as mortgages, or other assets that generate receivables, such as franchise fees. These bundles are then sold to investors, who collect the income from the underlying obligations.
Investing Ideas
Whitepaper: The Case for CLOs
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Key Takeaways
- CLOs offer portfolios of floating-rate bank loans securitized across the rating spectrum. The availability of floating-rate bonds is limited in the U.S., and the choices for high quality floating-rate securities is even more limited, yet around 80% of CLOs carry a credit rating from A to AAA.
- Relative to the investment-grade corporate credit market, CLOs have offered a consistent yield premium across the rating spectrum, in some cases as much as two times the yield offered over U.S. Treasuries.
- In an environment where interest rates are low and the risk of higher Treasury yields has risen, allocations to AAA rated CLOs may help investors diversify a traditional fixed income portfolio, offering lower volatility, higher credit-quality and less sensitivity to any rise in interest rates.
Investing Ideas
A Potential Turning Point in the Battle Against COVID-19
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Delivering better-than-expected trial data, a vaccine candidate from Pfizer and BioNTech could mark the beginning of the end of the pandemic and boost confidence in an economic recovery, now underway.
Fixed Income Insights
A Mostly Benign Outlook for U.S. Inflation
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The stabilization of U.S. economic growth amid unprecedented fiscal and monetary stimulus has raised questions about the likelihood of inflation returning. Global Head of Fixed Income Jim Cielinski explains why he does not see significant risk of sustained higher inflation materializing in the next few years – but cautions that short-term spikes are possible and that investors should evaluate the diversification that their fixed income portfolios provide.
Investing Ideas
Evaluating Stocks as Growth Continues to Grow
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Portfolio Manager Doug Rao discusses the phenomenon of concentrated market leadership and what that means for long-term investors.
Key Takeaways
- When market returns are driven by a handful of stocks, active investors face difficult decisions, especially when underweighting or not owning these stocks may significantly impact portfolio performance.
- The recent phenomenon of large-cap tech stocks driving a significant portion of stock market gains may be justified by the fact that these companies are strongly tied to themes related to digital disruption.
- Investors may benefit from focusing on competitively advantaged companies positioned to profit from these themes, which have only accelerated amid the COVID-19 pandemic and are likely to persist over the coming months and years.