As the world’s top investment manager, I want to share with you the latest insights on Jay Powell’s recent “hawkish cut” and how it will impact high-yielding municipal bonds. Let’s dive into why this move by Jay Powell is set to trigger a rise in muni-bonds and how you can take advantage of this opportunity.
Understanding Jay Powell’s “Hawkish Cut”
Jay Powell recently cut rates by a quarter point in December, but also revised the Fed’s rate-cut forecast to two from four in 2025. This unexpected move led to a spike in the yield on the note, signaling that the bond market believes that the job on inflation is not yet complete.
This shift in Powell’s stance is crucial as it indicates a potential turn in interest rates, which could lead to a rise in bond prices. This is where our contrarian opportunity in muni bonds comes into play.
“Adult in the Room” Jay Set to Trigger the Next Muni-Bond Rise
While many expect inflation and interest rates to rise under Trump 2.0, contrarians like us see a different scenario unfolding. There is a possibility that rates may top out and turn lower due to Jay Powell’s new stance. As rates decline, bond prices are likely to rise, presenting a unique investment opportunity.
Currently, high 10-year yields have made bonds unpopular. However, this presents an opportunity to invest in municipal bonds for safe, high, and tax-advantaged dividends.
Muni-Bond CEFs: Our Source of Steady 7.8% Dividends (and 0% Taxes)
Municipal bonds, or “munis,” are issued by state and local governments to fund infrastructure projects. What makes them attractive is that muni dividends are tax-free for most Americans, providing a significant advantage, especially for those in the top tax bracket.
One way to tap into the benefits of muni bonds is through closed-end funds (CEFs) that offer steady 7.8% tax-advantaged yields. This payout can be equivalent to a 12.9% yield on a taxable payout, like that of a stock.
The relationship between munis and the 10-year Treasury rate is evident, showing potential upside for investors. By investing in muni-bond CEFs, you can benefit from tax advantages and attractive yields.
Buying Munis on The Dip Always Pays (and Our Next Buy Window Is Here)
When it comes to investing in muni bonds, we recommend looking at discounted CEFs like the Nuveen Quality Municipal Income Fund. This fund offers a 7.8% tax-advantaged yield, with a current discount to NAV that presents an attractive buying opportunity.
Despite the volatility, NAD has outperformed ETFs like MUB over the years, providing investors with higher returns through reinvested dividends. Holding these funds for the long term can maximize tax-advantaged returns, especially with a 7.8% current yield.
Understanding Risks and Opportunities in Muni Bonds
When investing in munis, it’s essential to consider duration risk and credit risk. Credit risk is minimal with funds like NAD, thanks to the safety of munis and low default rates. Duration risk, on the other hand, can be managed effectively by monitoring interest rate changes.
NAD’s leverage strategy can magnify returns in an upmarket but also increase volatility during market downturns. However, with Nuveen’s expertise in managing leverage, investors can benefit from higher payouts in a low-rate environment.
Overall, investing in muni-bond CEFs like NAD can provide steady income, tax advantages, and potential capital appreciation. By understanding the risks and opportunities associated with these funds, investors can make informed decisions to enhance their financial future.
Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets.
Title: Unveiling the Top Investment Strategy for Maximizing Returns in 2021
Are you looking to grow your wealth and secure your financial future in 2021? As the world’s top investment manager, I am here to guide you through the most effective strategy to maximize your returns this year. Let’s dive into the details of how you can make smart investment decisions to reach your financial goals.
Understanding the Current Market Trends
In order to make informed investment decisions, it is crucial to be aware of the current market trends. In 2021, we are seeing a shift towards sustainable and socially responsible investing. Companies that prioritize environmental, social, and governance (ESG) factors are gaining traction among investors. This trend is not only driven by ethical considerations but also by the potential for long-term financial returns.
Additionally, the COVID-19 pandemic has accelerated the digital transformation of many industries. Companies that are adapting to the new digital landscape are poised for growth in the coming years. It is important to keep these trends in mind when crafting your investment strategy.
Diversification is Key
One of the fundamental principles of investing is diversification. By spreading your investments across different asset classes, sectors, and regions, you can reduce risk and increase the potential for returns. Diversification helps to protect your portfolio from the volatility of any single investment.
In 2021, it is advisable to diversify your portfolio by including a mix of traditional assets such as stocks and bonds, as well as alternative assets like real estate and commodities. This balanced approach can help you weather market fluctuations and achieve steady, long-term growth.
Embrace Technology and Innovation
The rapid pace of technological advancement is reshaping industries and creating new investment opportunities. Companies that are at the forefront of innovation, such as those in the tech and healthcare sectors, have the potential for strong growth in the coming years. By investing in these innovative companies, you can capitalize on the trends that are shaping the future economy.
Stay Informed and Stay Ahead
In the fast-paced world of investing, staying informed is crucial to making wise decisions. Keep up with the latest market news, economic indicators, and industry developments to stay ahead of the curve. By staying informed, you can identify emerging trends and adjust your investment strategy accordingly.
Analysis: In today’s ever-changing financial landscape, it is essential to have a solid investment strategy in place to secure your financial future. By understanding the current market trends, diversifying your portfolio, embracing technology and innovation, and staying informed, you can maximize your returns and achieve your financial goals. As the top investment manager, I recommend following these strategies to navigate the complexities of the market and build a successful investment portfolio. By implementing these recommendations, you can set yourself up for financial success in 2021 and beyond.