Fixed Income Q3 2023

After a strong sell-off in 2022, bonds now offer much higher returns.  We see limited downside risk in short- and intermediate-term bonds, as the bias towards rates is now to the downside. In fact, if rates fall next year, bond prices would likely improve.  The yield on cash is close to 5%, which is the highest it has been in a very long time.  Because the market expects interest rates to fall, the yield curve remains inverted, meaning long-term rates are below short-term rates. In this environment, we are actively moving money out of cash and into bonds or bond funds with defined maturity dates to lock in reasonably attractive yields without having to take on much maturity or interest rate risk.  Bonds maturing within the next five years or fewer appear to be the sweet spot for us. While most corporate borrowers have taken advantage of low rates to refinance high-cost debt, some may still need to refinance portions of their debt in the next few years. This refinancing effort might be either a challenge or an opportunity, depending on the circumstances. In that vein, we are taking a closer look at the debt-related metrics of our portfolio companies.

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Economic & Market Commentary

Fixed Income Q2 2024

As expected, the Federal Open Market Committee (FOMC) voted to leave short -term policy rates unchanged at 5.50% at its June meeting. The Fed acknowledged “modest further progress” on inflation but is not quite ready to cut rates. We expect the Fed to keep interest rates at current levels for most of this year. For investors, that means cash yields will remain elevated. But there is also a risk to holding too much cash
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Economic & Market Commentary

Equities Q2 2024

Strong stock market performance continued through the second quarter, but at a more moderate pace and with fewer positive contributors when compared to the first quarter. Three months ago, we highlighted strong economic growth, falling inflation, and hopes of near-term Fed rate cuts as the three key positive dynamics sending stocks higher in 2024. Today, that list has narrowed to two. Economic growth remains strong and inflation is still moving in the right direction.
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