Income investors need to 'wake up' to the new market regime. Where to find solid yields now
With Kevin Warsh heading the Federal Reserve, investors must accept the reality of a new market regime, said Luis Alvarado at Wells Fargo Investment Institute.
TL;DR
- Federal Reserve Chairman Kevin Warsh is implementing a 'regime change' at the central bank, altering its communication style and focus.
- Investors are advised to shift their focus from Fed signals ('Fedspeak') to reacting to economic data itself.
- The 30-year Treasury yield has reached a 19-year high due to inflation and spending concerns, with the government deficit soaring.
- While the market may experience volatility, attractive yields are available, necessitating a selective approach.
- Opportunities exist in the one- to five-year part of the curve, focusing on high-quality investment-grade corporates and mortgage-backed securities.
- Some experts believe real rates are higher than they have been in two decades, offering attractive income opportunities with potentially lower rate volatility.