High yield bonds are a bit lower today along with equities as there is some risk off investing going on. The strong ADP payroll number is not helping the markets and oil is a bit of a drag, moving lower toward $60. There were outflows from the high yield bond asset class yesterday after a one day inflow on Monday.
Today’s volatility is being fueled by Gary Cohn’s departure as the chief economic advisor, but the departure makes sense. He was aligned with President Trump on the Tax bill and they got that through, they are not aligned on the trade/tariff policy so they agreed to move on. Just take a look at today’s trade imbalance -$56.6 billion number, this can’t continue. I think the elephant in the room here is how real are China’s economic numbers and will this more equal playground the President is proposing expose how their government is responsible for propping up much of their economy, not the consumer.
With that said corporate America is doing well as witnessed by this latest earnings releases. What do you do with all this volatility and uncertainty as per Washington DC politics and policies? We believe that Peritus’ active high yield strategy offers investors an attractive option in today’s market environment. We invest in both high yield bonds and floating rate loans, and look to generate a coupon income and a yield to maturity that is higher than that of the indexes.
Peritus’ founders have a 23 year history together, refining and adapting to market changes and cycles, and we we feel we have a process and strategy in place with a goal of trying to deliver consistent returns with lower volatility than many of the index-based vehicles. The beauty of fixed income is the tangible dividends that are paid out or reinvested each and every month, and the market can’t take those away from you. Plus, you have a set timing on when you can expect your principal back on each holding so if Peritus’ team does their job this happens and that principal may appreciate.