Data Improves, Fed Demands More on Inflation: The Balancing Act Continues
Markets were set up for volatility this week as key inflation data coincided with the June FOMC meeting. Wednesday included the May CPI data in the morning, followed by the Fed’s rate decision, updated Summary of Economic Projections (SEP), and Powell’s press conference in the afternoon.
Why Underweight Long Duration Credit – Credit Curve Steepening
When the fixed income market talks about curves it is usually in reference to sovereign rates. The credit curve gets less attention but it and what signals it may be flashing are the center of our focus today.
Analyzing CPI: Insights, Trends, and Market Dynamics
First quarter inflation prints came in broadly hotter than expected, causing markets to materially reprice expectations for Fed cuts in 2024 from close to six to around two. April CPI showed hints of moderation from this trend, and the recent stickier inflation meant the in-line print was better than markets feared. Growth continues to be […]
Navigating Yield Environments: The Case for Short Duration Funds
The recent non-consensus move higher in interest rates has brought the 2-year U.S. Treasury to a yield back above 5%. This brought our attention to the yield differentials between short duration strategies and money markets. We have highlighted that the elevated yields available in money markets created a hurdle return for fixed income investors, raising […]
Fed Limbo: How Low Can Fed Funds Really Go?
The market narrative surrounding the timing and extent of Fed rate cuts continues to be dynamic as expectations shift with incoming data. The latest CPI data, which came in broadly hotter than anticipated, led to a swift market repricing, seeing expectations of Fed cuts for 2024 contract to fewer than 2. Considering markets were pricing […]
Keeping the Show on the Road
Bottom-up company fundamental analysis and individual security selection are at the core of generating risk-adjusted returns at Smith Capital Investors, but our active management process would not be complete without overlaying our blended top-down macroeconomic views to drive portfolio management decisions.
Moving on Up (In the Capital Structure)
At Smith Capital Investors, we have a keen focus on relative value, not just on a security and sector-specific basis, but also at the asset class level. One interesting trend we have been tracking at the asset class level is the divergence in relative value between high yield bonds and leveraged loans versus historical relationships.
Smith Capital Investors – Client Gratitude
Dear Friends, I have been historically averse to providing firm updates in my communication but find myself driven to share some exciting news and milestones achieved here at Smith Capital Investors. This comes as we recently celebrated our six-year anniversary in February.
