评估自FOMC会议以来哪些基金表现良好

How have NAVs performed since the FOMC meeting in late July when we undertook a paradigm shift in the bond markets?

The rate decline resulted in REITs, municipal bonds, and preferred stocks doing very well.

Since the writing of this article, the trade has shifted again back to the reflation trade.

We do not think this will last!  So get your shopping lists ready!!

One way we analyze funds is to see how their NAVs perform during certain periods of time. That can give us much more insight into how a fund is positioned and the key sensitivities that affect the fund's NAV. Below we screened funds that have performed well since the July 30

FOMC meeting in which we saw the first Fed Funds rate cut in over a decade.

We first looked at NAV changes since July 30

for a near-term look at performance following the meeting when volatility ticked higher. The S&P saw a moderate pullback from the highs around 5.5% starting right after that meeting. The 10-year yield followed the market down in lock-step, hitting yields not seen since 2016.

Clearly, anything with duration is going to have a nice tailwind to its NAV prices. That includes sectors like munis, preferreds, and corporates. Meanwhile, areas of the market that do better when rates rise saw some headwinds to their recent results. In addition, we saw spread widening occur, thanks to the volatility. Anytime the VIX (fear index) pops up, we tend to see high yield spreads widening. That is, when the market is gyrating, the yield that investors require to buy a junk-rated bond increases.

We highlight that pop below. A chunk of that increase was centered on high yield energy bonds which have been weak performers in the last few weeks. At 4.35%, high yield spreads are saying that the market risk is a bit elevated but no where near the recession warnings that have been rumbling throughout the media.

That was a drag to any type of credit-oriented fund including high yield and bank loans. In fact, 100% of high yield CEFs and 100% of bank loan (floating rate) funds posted a negative NAV return since July 30

. Conversely, 100% of muni CEF (both state, national, and taxable) posted a positive NAV result. Overall, the average taxable bond CEF was down 1.01% since July 30

.

So we know munis and preferreds have done well, while high yield and floating rate have been weak. Let's look at the multisector category of CEFs which is one of the larger and more popular.

Remember, this is sorted by NAV change since July 30. With rates falling, duration has done well. Of course, that does not mean past performance is indicative of future results!

Multisector:

Key observations:

Real Estate/ Utilities:

Key Observations:

Mortgage:

Key observations:

High Yield

Key Observations:

I think this is a great exercise to see how funds are positioned especially since we have entered into a new paradigm as the Fed begins cutting interest rates. For those thinking that the current regime will likely continue (lower rates, flight to safety, etc) then check out the green highlighted funds. For those that think this was a blip and that we go back to positioning before the FOMC meeting, then the red highlighted funds could see a sharp recovery.

We continue to focus on funds that are likely to be near the top of the list because they've shown some defensive characteristics. We would think it would help provide downside protection, in addition to our muni positions, when the eventual downturn comes.

The reflation trade has since re-appeared but we do not think this will last. This is providing a great opportunity for investors to get into the duration trade here after a sharp sell-off in REITs, munis, and preferred stocks in just a couple of weeks.

I am/we are long TSI, HYB, IHIT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.