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The Bottom-Up Search for Value and Income
By Advisor Perspectives
During the first quarter of 2018 the MSCI World Index, the Bloomberg Barclays US Agg Total Return Index and the ICE BofAML BB-B Global High Yield Constrained Index all declined, returning -1.2%, -1.5%, and -0.3%, respectively. The US dollar was weak with the euro, the yen and gold price appreciating 2.5%, 5.9% and 1.7%, in turn, while the price of Brent crude oil climbed 3.6%. Inflation fears drove US 10-year Treasury bond yields from 2.41% to 2.74%. Looking across the global income landscape, it remains a difficult environment for yield-oriented investors. Interest rate policies across the world are still skewed to the confiscatory, with negative nominal interest rates affecting over $8 trillion of debt (see chart below). These policies are essentially a tax on the savers for the benefit of borrowers. With these dynamics in place income seekers should remain wary as many fixed and equity income investments, alike, appear overvalued.
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Photo: Investment Zen