Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Dear James / Shawn, Congratulations that several of your recent "hunches" about the market direction have been spot on. Well done ! Now that 3yr bonds appear to have peaked, how far off do you see the A-REITS and Banks being "buys" for the MM Income fund ? Most subscribers would be interested in gaining more income with a degree of "safety" from these investments. best wishes John.
Hi John,
Firstly thanks for the thumbs up, much appreciated. We have a slightly different skew between the Banks and REIT’s assuming that bond yields have indeed peaked:
Banks – As the accompanying chart illustrates banks are positively correlated to rising bond yields because they historically enjoy wider margins in a rising interest rate environment. Hence we are holding a slightly underweight exposure to the Banking Sector at this point in the cycle as we believe, while the banks indeed yield well, they are unlikely to rally strongly from current levels after enjoying a great 2-years.
REIT’s – Conversely the REIT’s have struggled over the last few years as rates rise but we can see value returning to the sector and we are more likely to be increasing our exposure here than to the banks.
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