Astoria is lucky to be a contributor to main media
Astoria is lucky to be a contributor to main media retailers comparable to CNBC. This week, Astoria’s CIO, John Davi, appeared on CNBC to debate HY Credit score and Bitcoin. You possibly can watch the varied interviews by clicking under:
- Excessive Yield Credit score phase (click on right here)
- Bitcoin phase (click on right here)
- Full interview (20 minutes; click on right here)
Keep away from bonds just like the plague. Inflation is the demise of bonds. There may be an excessive amount of bond provide, and no one is stepping as much as purchase them. The 10 12 months is heading in direction of 3% in our view. It won’t be a straight line to three%, however we predict it would finally get there in time. Solely extraordinarily particular buyers which have strict liabilities they should match with revenue needs to be in bonds. In any other case, in case you are on the lookout for comparatively low danger investments (which bonds aren’t proper now), contemplate parking your cash into ultra-short length bond funds (lower than 1 12 months length) till the 10 12 months settles down. Watch tickers like ARKK, QQQ, TLT, and IEF to see the market’s response to larger charges.
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Cyclicals & inflation delicate belongings stay enticing in Astoria’s view. We nonetheless suppose there’s extra upside in these cohorts as rates of interest rise larger however acknowledge {that a} good portion of their margin of security has eroded. Again in Q2 2020, ETFs like XME, COPX, RING, & IWM had been buying and selling at 6-10 P/E ratios. Valuations have doubled since then!
What isn’t priced into shares? We consider larger taxes are coming in 2022, however we don’t suppose the market is pricing that danger in. Shares can nonetheless rally with larger taxes, however buyers must be extra selective as we transition out of the early a part of this new financial cycle. Worth, cyclicals, and commodities will get picked up in momentum/pattern following methods which needs to be a tailwind for this cohort.
HY Credit score: We expect this asset class is horrible from a danger/reward standpoint. Why take the danger of proudly owning HY Credit score when credit score spreads are very tight? Sure, HYG yields 5%, however it could fall 20-30% throughout a recession which it did in 2008/2020.
As opportunistic ETF mannequin managers, we’d a lot quite personal excessive dividend paying shares than HY Credit score. As an illustration, SDY has produced double the CAGR of HYG over the previous 10 years. Sure, it has include larger volatility ranges, however its danger adjusted return (i.e., Sharpe Ratio) is larger than HYG.
In brief, with HY Credit score you get all of the draw back and little upside. With shares, you get all of the draw back, however you might be compensated for that danger by getting all of the upside. Why on earth would you need the danger/return profile of HY Credit score except you’ve gotten strict liabilities it’s essential offset? In case you are on the lookout for the perfect return per unit of danger, keep away from HY Credit score like third interval French class (credit score goes to the film Ocean’s Eleven; click on right here).
Finest,
Astoria Portfolio Advisors
Astoria Portfolio Advisors Disclosure: At of the time of this writing, Astoria held positions in XME, COPX, RING, and QQQ on behalf of its shoppers. Previous efficiency isn’t indicative of future outcomes. Any third-party web sites supplied on www.astoriaadvisors.com are strictly for informational functions and for comfort. These third-party web sites are publicly accessible and don’t belong to Astoria Portfolio Advisors LLC. We don’t administer the content material or management it. We can’t be held answerable for the accuracy, time delicate nature, or viability of any data proven on these websites. The fabric in these hyperlinks isn’t supposed to be relied upon as a forecast or funding recommendation by Astoria Portfolio Advisors LLC, and doesn’t represent a advice, provide, or solicitation for any safety or any funding technique. The looks of such third-party materials on our web site doesn’t indicate our endorsement of the third-party web site. We’re not accountable for your use of the linked website or its content material. As soon as you permit Astoria Portfolio Advisors LLC’s web site, you’ll be topic to the phrases of use and privateness insurance policies of the third-party web site. Refer right here for extra particulars.
Picture Supply: CNBC
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.