Mackenzie Minute: December 2, 2016
Movin Mokbel, Portfolio Manager on the Mackenzie Fixed Income Team, discusses the various factors that may impact markets in 2017.
Trump was elected President in the U.S. Trump's philosophy on the economy is to spend heavily on infrastructure, to cut taxes, and to bring back manufacturing into the U.S. This fiscal spending should induce the economy and will be funded by more government borrowings. Therefore, the market is pricing in higher treasury yields.
We are watching the Fed on December 14th. We anticipate a hike, but we still need to watch for Fed signals for markets and the rate policy going forward. Also, Trump's policies and their implementations are critical for markets over the next two full quarters. His cabinet posts will also dictate how certain industries and sectors will be affected. Lastly, energy and commodities and growth in China and events in the world like the Italian referendum that's coming up on this weekend, on Sunday; all of these things will dictate how markets will trade in 2017.
Floating rate loans are actually benefitting from these events with big inflows over the last few months; $1.1 billion came in last week alone. Rising rates are good for floating rate. And, if the economy improves than the credit component will do well. So, loans should continue to do well in 2017. Our mandate is a tactical, flexible, actively-managed mandate with some high-yield exposure in it, a double below rating and yielding over 7%.