Scared of Free Falling off the Fiscal Cliff? Here is Your Rope!


By TJ Kim – Bondsquawk

November 5, 2012

After a long and fierce election period, in a few weeks, the U.S. will appoint a new president or re-seat the incumbent. However, what appears uncertain even after the presidential election is how the United States would cope with the Fiscal Cliff looming over the nation. While tax increases and spending cuts threatened the stability of the already sluggish economic growth, BlackRock investment team provides investment advice in 2012 Elections: Implications, Insights and Investments.

In Fixed Income sector, high yield bonds, floating rate loans, and municipal bonds provide good long term investment opportunities.

“Two areas of the market we find particularly attractive are high yield bonds and floating-rate loans, both of which are compelling from a fundamental perspective. High yield bonds are also benefiting from low default rates and floating-rate loans offer both attractive valuations and longer-term protection from potentially higher interest rates…In addition to the tax benefits that we previously discussed, munis are supported by a strong technical backdrop. Municipal bond issuers are in the midst of a refinancing wave and many municipalities are scaling back on new issues, both of which effectively shrink the market and create a compelling supply/demand dynamic that we believe is likely to continue.”

As for Equity investment, investors should pay attention to high quality dividend paying stock as corporations expect to maintain their relative healthy balance sheet. Moreover, in 2013, investors need to keep an eye on global markets as more risks may transfer from Europe to the U.S.

“Additionally, high-quality, dividend-paying companies tend to perform relatively well in times of uncertainty. Even if we do see an elevation in “risk-off” sentiment, dividend payers would likely remain an attractive area of the equity market. Second, we would emphasize the importance of taking a more global perspective. Investors focusing on US stocks have done quite well over the past several years, but it does appear that global risks may be shifting somewhat from Europe to the United States. This is not to suggest that the secular bull market in the United States is coming to an end, but rather that investors should widen their focus. We think selected European equities look quite attractive, and we would also encourage investors to seek out opportunities in other areas of the world, including countries such as Australia and New Zealand as well as many emerging and frontier markets that have compelling valuations.”

Original post can be found Here

The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.



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