Strategies for a Changing Market Texas Public Funds Investment - - PowerPoint PPT Presentation

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Strategies for a Changing Market Texas Public Funds Investment - - PowerPoint PPT Presentation

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Strategies for a Changing Market Texas Public Funds Investment Conference Texas Association of Counties Houston, TX November 7, 2019 Ellis Phifer, CFA, CMT Managing Director (901) 579-4831 ellis.phifer@raymondjames.com Intended for

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SLIDE 1

Texas Public Funds Investment Conference Texas Association of Counties

Houston, TX

November 7, 2019

Strategies for a Changing Market

Ellis Phifer, CFA, CMT Managing Director (901) 579-4831 ellis.phifer@raymondjames.com

Intended for Institutional Clients Only See Slide 29 for Important Disclaimers & Disclosures

FIXED INCOME RESEARCH

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SLIDE 2

2

IT’S NOISY OUT THERE

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IF THAT WASN’T ENOUGH

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SO…

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QUESTIONS TO START

When will the U.S. economy experience its next recession?

  • 2019?
  • 2020?
  • 2021?
  • 2022?
  • Beyond 2022?
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SLIDE 6

6

QUESTIONS TO START

Where are interest rates generally heading?

  • Higher?
  • Lower?
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SLIDE 7

7

QUESTIONS TO START

Where do you invest along the yield curve?

  • 0 to 3 years?
  • 0 to 5 years?
  • 0 to 10 years?
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SLIDE 8

8

YIELD CURVE EXPECTATIONS

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SLIDE 9

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WHAT’S WITH THE REPO HEADLINES? Federal Reserve Balance Sheet

Banking System Reserve Balances

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INTEREST RATE CYCLES: DÉJÀ VU?

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ECONOMIC EXPECTATIONS

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ECONOMY: PMI

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ECONOMY: EMPLOYMENT

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ECONOMY: WAGES Unemployment vs. Wage Growth

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15

ECONOMY: WORKERS BELIEVE THEIR WAGES WILL NOT DROP

Fewer and fewer workers think their wages will fall

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ECONOMY: CONSUMER BALANCE SHEET

Household Debt Payments (as % of Disposable Income)

Household Debt (as % of Disposable Income)

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ECONOMY: LABOR QUALITY SHORTAGE

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ECONOMY: EASY CREDIT PLUS LOAN GROWTH Commercial Bank Lending & Lending Standards 3-Month Growth Rate

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ECONOMY: LEI SLOWING BUT STILL POSITIVE Leading Economic Indicators (LEI)

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IT STARTS AT THE TOP

Diversify Stay Invested Manage Liquidity Edify

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21

IT STARTS AT THE TOP

Diversify

  • Different:
  • Maturities
  • Call Structures
  • Mix of Callables and Non-

Callables

  • Sectors [Agencies, MBS, DUS,

Corporates, Discount Notes, CDs, Commercial Paper]

  • Coupons
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IT STARTS AT THE TOP

Stay Invested Manage Liquidity

  • Not staying invested means you

are timing the market.

  • There is a cost of waiting.
  • Cashflow and liquidity are the

main goals.

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IT STARTS AT THE TOP

Edify

  • Learning about new, approved

security types.

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STRATEGY IMPLICATIONS

  • Capture yields with longer lockouts and

mortgage securities (Pass-thrus, Agency CMBS [DUS], Callables).

  • Increased uncertainty and no inflation should

keep rates low.

  • Curve should remain fairly flat but with a positive

slope.

  • Best values will fluctuate over time so stay

tuned.

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RELATIVE VALUE OPPORTUNITIES: ALONG THE CURVE

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RELATIVE VALUE OPPORTUNITIES: MORE FOCUSED 10/9/19

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RELATIVE VALUE OPPORTUNITIES: MORE FOCUSED 10/24/19

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SUMMARY

  • Federal Reserve must address confidence (by

easing) and liquidity concerns (more repos).

  • Economy is still growing, albeit at a slower pace

than last year.

  • Global economy is more of a concern.
  • Plenty of news events still in front of us (trade

talks, government funding, Brexit, etc.).

  • Recession chances have increased.
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SLIDE 29

29

DISCLAIMERS AND DISCLOSURES

The information contained herein is based on sources considered to be reliable but is not represented to be complete and its accuracy is not guaranteed. The opinions expressed herein reflect the judgment of the author at this date and are subject to change without notice and are not a complete analysis of every material fact respecting any company, industry

  • r security. Raymond James & Associates, Inc. and affiliates and their officers, directors, shareholders and employees

and members of their families may make investments in a company or securities mentioned herein before, after or concurrently with the publication of this report. Raymond James & Associates, Inc. may from time to time perform or seek to perform investment banking or other services for, or solicit investment banking or other services from any company, person or entities mentioned herein. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any security. Raymond James & Associates, Inc. makes no representation as to the legal, tax, credit, or accounting treatment of any transactions mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You should consult with your own advisors as to such matters.