After a few calm summer months where inflation decelerated and the labor market kept chugging along, a new market narrative has taken the driver’s seat: long-end interest rates. That’s not to say that rates have been docile over the past year, but most of the action has been on the short end, e.g. money markets, credit cards, or your savings account. But higher 10yr & 20yr rates will affect an entirely different array of things from housing and mortgages to big investments like a semiconductor fab or infrastructure project.
Of course, there are a lot of variables at play here and to be honest, interest rates are one of the most complex topics in all of finance. David and I try to tackle it all in episode 9 of Doxa Takes - from how rates can effect jobs and inflation, or the reflexive property that makes them so difficult to forecast, to how Doxa constructs a bond portfolio to weather both rising and falling rate environments.
Our quick take: We do think that being more defensive here makes sense. Our outlook is still solid, but we have to recognize that with long-end rates this high, growth should slow a bit going forward. We continue to like our high quality approach but with a defensive tilt, and see a barbell strategy in fixed income as offering a good risk/reward balance. As always, please reach out to us if you want to dive deeper into the world of rates!
Click the link below or search "Doxa Takes" on Apple Podcasts, Google, Spotify, or Overcast. Enjoy!
