Wind

Early to mid cycle economy 

Steady economic growth

Potential for rising rates

Compelling spread

Steep yield curve

  • Shorter than benchmark duration

  • Overweight Corporates and FRNs; underweight Treasuries and Mortgages

  • Favor BBB

  • Active trading for yield

Waves

Late economic cycle 

Expectation of inflation ahead

Restrictive monetary policy

Spreads are narrow; could widen

Flattening yield cure

  • Duration neutral to slightly overweight benchmark

  • Sectors neutral to benchmark

  • Favor AA to A

  • Trading: Favor issuers with stable ratings and stable leverage

Weather

Economic growth slowing 

In, or on cusp of, recession

FOMC is exiting/changing policy

Spreads widen; possible inverted curve

Volatility and uncertainty

  • Duration longer than the benchmark

  • Build positions in Credit, FRNs and MBS opportunistically

  • Buy quality income at the right price to increase yield

  • Trading: Adjust sectors and quality

The JKMilne Edge

"Anyone can hold the helm

when the sea is calm."

                  . . ...Publilius Syrus (85-43 BC)

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