November 13, 2017
Virtually every piece of data you could look at is associated with a solid economy, and it is about to get stronger from the surge in post-hurricane rebuilding, seasonal tailwinds, and possible tax cuts. At the same time, the Fed is ratcheting rates higher and normalizing its balance sheet, spreads in most fixed-income sectors are moving to historical tights, and below investment-grade yields are likely to breach historical lows. Investors today are simply not being compensated for the risks they are taking. The question now is how to generate yield without taking on undue interest-rate or credit risk. The challenge is to avoid chasing short-term gains and maintain the discipline required for long-term investing success.
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Benign conditions support near term value in credit, but default rates will rise as the Fed tightens further and corporate debt levels continue to grow.
Prepare for when the effects of fiscal stimulus begin to wear off and monetary policy keeps getting more restrictive.
Current conditions could persist for some time, but with a possible recession approximately two years away, the time for caution is approaching.
Global CIO Scott Minerd and Head of Macroeconomic and Investment Research Brian Smedley provide context and commentary to complement our recent publication, “Forecasting the Next Recession.”
In his market outlook, Global CIO Scott Minerd discusses the challenges of managing in a market melt up and highlights several charts from his recent piece, “10 Macro Themes to Watch in 2018.”
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2018 Guggenheim Partners, LLC. All rights reserved. Guggenheim, Guggenheim Partners and Innovative Solutions. Enduring Values. are registered trademarks of Guggenheim Capital, LLC.