After such a pronounced sell-off in virtually every fixed income sub-asset class and a broad rise in yields, Principle Wealth Partners in Connecticut is finding multi-sector and flexible bond strategies particularly enticing.
‘History tells us to expect great results when bond and stock valuations are close to historical averages [and] the bond opportunity is particularly favorable if heightened volatility in the stock market continues.’
Julina Ogilvie, Partner and Wealth Advisor, Principle Wealth Partners
‘We specifically like nimble strategies with inflows and a flexible objective that enables execution in a timely fashion,’ says Julina Ogilvie, a partner and wealth advisor based in its Westport office.
With greater confidence in bonds over stocks in the near term following the worst calendar year for bonds in 200 years in 2022 (and the sharpest simultaneous decline in US stocks and bonds in history), it has shifted some equity exposure into bonds.
‘History tells us to expect great results when bond and stock valuations are close to historical averages,’ says Ogilvie. ‘The bond opportunity is particularly favorable if heightened volatility in the stock market continues.’
Yields have more than doubled across most fixed income categories. High yield corporates, which were yielding just over 4% at the start of 2022, yield 9% today. Tax-equivalent yields in investment grade municipal bonds have tripled from less than 2% to 6%.
‘Not only can we offer our clients more income – even those clients who don’t want to extend out on the risk spectrum – but there is also an opportunity for [price] appreciation,’ says Ogilvie.
‘Most secondary corporate and government bonds are trading under par. With the Fed and markets expecting to see peak interest rates this year, the opportunity for both yield and return in the bond market is inviting.’
Principle likes to pair a nimble high yield manager, such as Artisan High Income, with a more flexible multi-asset mandate, such as Thornburg Strategic Income. It has also added to the Principal Tax-Exempt Bond fund to take advantage of the significant drawdowns in the municipal space.
Principle Wealth Partners LLC (“PWP”) is an SEC registered investment advisor. Advisory services are only offered to clients or prospective clients where PWP and its representatives are properly licensed or exempt from licensure.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor. Risk associated with equity investing include stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of Principle Wealth Partners strategies are disclosed in the publicly available Form ADV Part 2A.
