Still thinking about your investment strategy for 2017? If you’re an investor who values income, you might want to try thinking: Assuming something unexpected might happen next year, it’s time to protect your portfolio now. Such advice appears to be at odds with current market sentiment. Recent performance in financial markets shows that investors equate Trump with accelerating economic growth and rising inflation, both of which favor higher-yielding, riskier assets such as high-yield bonds. Yes, the strong performance of the U.S. economy and some of the policies introduced by Trump are expected to bring upward space for high-yield bonds. AllianceBernstein also recommends that investors should maintain their layout of high-yield assets. But what if the unexpected happens? What if Congress blocks some of Trump’s policy measures? Or is the economy accelerating at a slower pace than expected? Whenever the market sprints strongly in a single direction, it may be useful to unearth the inherent contrarian thinking that will benefit individual portfolio performance.
Reduce investment risk in high-yield bonds
Adopting a contrarian investment strategy Nepal Phone Number doesn’t mean clear all of your high-yield bond positions. On the contrary .Shorten the duration and focusing. On the physique of the bond-issu company .Is a better to reduce risks. Accord to AllianceBernstein’s research .In the long run. High-quality.Short-duration high-yield bonds can .Capture about 80% of the market rally. But only participate in 70% of the market decline (below). 123 Advantages of high-rated.Short-duration. High-yield bonds. Why the two qualities of “high quality” and “short duration” so complementary. To each other? First of all. Shortening the duration means t the impact of ris interest rates on investors is low. And the impact is similar to the short-term fluctuations in .the general market. So when the market goes down, short-duration bonds perform better.
The same goes for investing in high-quality bonds
Compared with CCC-rated junk bonds, high-rated bonds issued by companies with strong balance sheets can better withstand the impact of rising financing costs and capital outflows. However, when the market is booming, it is easy for investors to overlook the importance of “high quality” and “short duration”. This year, the U.S. high-yield bond market has risen by more than 16%, and CCC-rated bonds are among the best performers; in other words, the more money investors put into CCC-rated bonds, the more CCC-rated bonds will rise. However, such an investment strategy is not a long-term solution, especially now that we are at the end of the credit cycle. Even if the new policies in the future really accelerate the growth of the U.S. economy, interest rates will eventually rise, which may cause some CCC-rated bond issuers to default. Get out of the corporate debt framework In addition to high-yield corporate bonds, there are other sources of income in the market. This is why the investment strategy of the global multi-currency securities is so important. The most effective high-yield investment strategies are usually those that can master multiple sources of income globally.