Wind
Early to mid cycle economy
Steady economic growth
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Potential for rising rates
Compelling spread
Steep yield curve
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Shorter than benchmark duration
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Overweight Corporates and FRNs; underweight Treasuries and Mortgages
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Favor BBB
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Active trading for yield
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Waves
Late economic cycle
Expectation of inflation ahead
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Restrictive monetary policy
Spreads are narrow; could widen
Flattening yield cure
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Duration neutral to slightly overweight benchmark
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Sectors neutral to benchmark
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Favor AA to A
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Trading: Favor issuers with stable ratings and stable leverage
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Weather
Economic growth slowing
In, or on cusp of, recession
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FOMC is exiting/changing policy
Spreads widen; possible inverted curve
Volatility and uncertainty
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Duration longer than the benchmark
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Build positions in Credit, FRNs and MBS opportunistically
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Buy quality income at the right price to increase yield
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Trading: Adjust sectors and quality
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The JKMilne Edge
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"Anyone can hold the helm
when the sea is calm."
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. . ...Publilius Syrus (85-43 BC)
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