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As we enter 2014, we see several themes. The economic consensus appears to believe that the “recovery” is in the beginning stages and the global all clear sirens have sounded, and that Fed tapering will lead to higher interest rates across the board. While this interest rate move may happen in the short run, demographics, liability driven investing, and a lack of global growth may surprise everyone and take interest rates nowhere. We see the high yield market as positioned well in the year ahead irrespective of rates and that in a trendless 2014, true active management in all asset classes will be required. Click here to view our year-end piece, “Of Elephants and Rates.”
With unemployment still elevated, very moderate global growth, minimal inflation, and the Fed explicitly clear in the message that tapering does not mean tightening, all the while extending their low interest rate policy for the next couple years, it is unclear that a rapid rise in rates is on the horizon, especially given the big move we have already seen. But for the sake of argument, let’s assume that rates do rise even further. What does that mean for the high yield market and the various “strategies” out there to deal with rising rates? Click here to read our recent piece.
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