Senior Loans: Rising Rates, Rising Coupons
The S&P 500 has officially entered a bear market regime as of June 14, having sold off 22% from its closing high on January 3, 2022. The selloff this year was triggered by a combination of factors, including record high inflation, the Russia-Ukraine war, and a substantial tightening of financial conditions driven by the Federal Reserve (“Fed”). Over the past 40 years the market has become accustomed to falling inflation, low/declining interest rates, and periods of quantitative easing, which led to high equity valuations and strong returns. Long-duration assets benefited the most in this type of regime. However, we argue that the current market environment is the opposite of the previous cycles. Characteristics including high inflation, rising interest rates, slowing GDP growth, and a hawkish Fed warrant a shift in investment strategy. Investors should generally look to position their portfolios more defensively than in the past. Additionally, investors need to look for strategies that can act as an inflation hedge and that have moderate to high dividend yields, which provide a margin of safety in volatile markets. One area of the market that meets these criteria is real assets equities, which we believe present an excellent opportunity for investors in the current market environment.
Créances privilégiées : taux à la hausse, coupons à l’avenant
Le 16 juin 2022, la Réserve Fédérale des États-Unis (Fed) a annoncé une hausse de taux d’intérêt de 75 points de base, la plus importante depuis 1994. La fourchette du taux cible de la Federal Funds s’est ainsi établie entre 1,5 et 1,75 %. Les participants à la réunion, soit les membres du conseil d’administration de la Fed et les présidents de banque de la Fed, ont projeté que le taux médian des fonds fédéraux grimpera à 3,4 % d’ici la fin de 2022, ce qui laisse penser que les hausses de taux d’intérêt se poursuivront tout au long de l’année, et même par la suite, dans le but de juguler l’inflation croissante.
