Well the CPI came in cooler than expected and interest rates have initially plunged–the 10 year falling 15 basis points. To me this is a ‘party’ number — as in ‘lets party’. By the end of the day we may see interest rates creep back up to a more reasonable number – say 4.55%. We should see a reasonable rally in income securities as folks believe that the odds of a December rate hike on 12/13 have become less likely–although we have much data to come in in the next month. We’ll just have to wait and see.
Personally this is the time one wishes they were 100% invested in baby bonds and preferreds–any rally today in income markets will outperform my portfolio since I am only 50% (maybe it’s 40% or maybe 55%) in those areas. To think one can ‘time’ the exact bottom and top is a fools errand. For now I will have to be happy with a gaggle of CDs at 5.25% to 5.75%–and honestly I am very happy. In spite of the potential rallys in income issues I am looking at buying a number of ‘pinned to par” issues with my minor dry powder and they will not experience the rally of the general markets–i.e. the SiriusPoint 8% preferred (SPNT-B) purchased last week which should trade plus and minus 50 cents from $25 based on an anticipated redemption in a couple years. I’m happy to collect a solid 8%.