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CIP Quips

Potentially Lower for Longer?

Whats in the news:

In March the Federal Reserve began the process of normalizing interest rates.   In a statement, Federal Reserve Chairman Janet Yellen said,

 “The simple message is the economy is doing well … we have confidence in the robustness of the economy and its resilience to shocks” 

Since Yellen made that statement, expectations for a June rate hike have been fluctuating, falling from 63% on April 10th to 50% April 17th and back up to 67% on April 24th.  While the shorter-maturity sector has behaved in direct line with the Fed’s actions and guidance, the longer-maturity sectors have been contracting; causing a flattening of the yield curve.  Low interest rates and yield spread contraction present challenges to income-oriented investors who are seeking to maximize cash flows without taking on more risk.  

Source: Bloomberg as of 4/25/17


What are we thinking?

Limited clarity from the new administration concerning reforms, the distraction of global diplomacy and the promised re-set of the US healthcare system, paired with anemic economic data points (retail sales, unemployment, CPI) have caused a flight to safety and the yield curve getting stepped on.  

So what does this mean for retirees who depend on income generated from their investments? It could mean lower rates for longer.

Our Current Income Portfolio opportunistically manages corporate bonds and preferred securities and is designed to position investors to benefit in a rising rate environment while also generating high and reliable levels of income (without taking on excessive risk) in a low rate environment. We believe that the enhanced current income characteristics of preferred securities continue to offer opportunities for income-focused portfolios when implemented correctly and could be a suitable solution in a lower for longer environment.  



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.


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