Strategic Enhanced Yield Fund Commentary
The first quarter provided fixed-income investors with surprises and new challenges: The Russian-Ukraine War added to existing supply chain disruptions, leading to the worst quarterly performance for the asset class since 1980. Although the U.S. economy remains on strong footing, the high rate of inflation has been more persistent than anticipated. This puts pressure on the Federal Reserve to raise its short-term target federal funds rate more aggressively than had been forecast. Current expectations are for the rate to reach 2.25% by year-end 2022 and 3.25% by December 2023.
Positioning the Strategic Enhanced Yield Fund
Portfolio composition is subject to change.
The Fund is well below its benchmark duration. it has a very heavy weighting to the securitized sector, specifically the non-agency mortgage-backed securities and non-agency asset- backed securities markets. The Fund also has a large allocation to the corporate sector. As monetary and fiscal policy become tighter, we favor moving up in quality and liquidity.
Why should investors consider investing in this Fund?
Interest rates have moved up significantly and the market has priced in aggressive tightening from the Federal reserve. Higher interest rates along with the spread widening we have witnessed so far this year have greatly improved the yields available in the market. If more restrictive monetary policy weakens the economic outlook, rates have room to fall from current levels, adding the potential for price appreciation to the improved yield levels.
Not FDIC Insured | No Guarantee | May Lose Value