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Will Rising Interest Rates Impact Fixed Income?



Until recently, the Fed has been the only game in town providing stimulus to the economy. Now, we believe members of the Federal Reserve have to contemplate the potential effects of President Trump’s pro-growth fiscal policy:

  • We think the Fed has to be careful in this new environment, and that they will stick with modest, gradual rate hikes until they see growth in real GDP getting closer to 3%.
  • In our opinion, the Fed wants to get out of this "lower-for-longer" environment.  

We’ve seen low interest rates rencourage people to stretch for yield by purchasing stocks that pay high dividends like consumer staples and utilities.  As a result we believe those sectors are not cheap.  Bonds provide an alternative for those seeking income.

With interest rates likely increasing, we favor the shorter end of the yield curve in the form of short term bonds with strong fundamentals, split between U.S. Corporate and U.S. Treasuries. Our bottoms-up approach analyzing individual bonds allows us to buy a mix of investment grade and high yield securities, though our average fixed income portfolios maintain an overall A- investment-grade rating. 


Disclosure

The thoughts and opinions expressed in the video are solely those of the persons speaking as of February 1, 2017.

There can be no assurance with regard to future market movements. The discussion of individual companies should not be considered a recommendation of such companies by the Fund's investment adviser. The discussion is designed to provide viewers with an understanding of how the Fund's investment adviser manages the Fund's portfolio. There can be no assurance with regard to future market movements. Mutual fund investing involves risk. Principal loss is possible. The Fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the Fund and may be obtained by calling 1-888-859-5856. Read it carefully before investing. Distributed by Ultimus Fund Distributors, LLC.