SLC Management and its affiliated investment managers will offer their alternative investment strategies to the U.S. high net worth market.
Helping investors meet their current cash flow and future capital appreciation goals.
Unlimited access to our bond offerings and dedicated, personal support
Customized portfolios selected and managed by professional managers
Partnering with select institutional managers
Expert advice, ongoing trade support, and transparent pricing
An emphasis on solid investment disciplines and specific asset classes
March 04, 2024
January 29, 2024
TOP
Financial Industry Insights from Advisors Asset Management
On February 13, 2014
A Timely Alternative in the Taxable Municipal Arena
What is an income investor to do? Between the barrage of the Chairperson Yellen’s testimony on the state of the economy and tapering, what looked like an easing opportunity for income investors, the exact opposite has happened. The 10-year Treasury has declined by 27 basis points at a time when GDP prints are more robust than the post-recession average and tapering is estimated to be systematically withdrawn throughout 2014. On top of that, we have seen a slight selloff in equities rebound off of the long-term trend line to a tune of nearly 4.5% on the S&P 500.
One area that we constantly stress here is that being a contrarian is difficult, but can be a fruitful venture. For fixed income investors, we pointed out the terrific entry point, historically, in tax-free municipals every time the 12-month total return turned negative. Tax-free municipals are still our favorite debt instrument; however, many assets are held in tax-deferred accounts. Aside from being selective on corporate taxable debt, one might consider another timely alternative in the taxable municipal arena.
Though historical data is not nearly as lengthy, the last seven years does show a similar example to the tax-free opportunity as detailed before.
*Past performance is no guarantee of future results
What one finds is that we have entered our eighth month of negative rolling 12-month return in taxable municipals. The same timeframe that occurred in 2009 showed the total return in taxable municipals for the two years following to be 18.6%, while the 3-year had a more robust 41%. Though there were some anomalies that may have skewed the negative return in taxable municipals in 2008/2009 from an underlying credit quality improvement over corporates – based upon historical default and recovery data and a pick-up over similar-rated corporate taxable debt – taxable municipals appear to be an opportunity for those looking for potentially enhanced yield in tax-deferred accounts or those in lower income tax brackets.
This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Municipal Disclosures webpage. Please see the Disclosures webpage for additional risk information at www.aamlive.com/blog/about/disclosures. For additional commentary or financial resources, please visit www.aamlive.com
topics
Be the first to read our latest posts.