Most investments lost ground in 2015’s volatile markets and continue to do so this year. One of the few asset classes to deliver positive results was municipal bonds. What’s the outlook for this year? Robert DiMella, co-head of award winning MacKay Municipal Managers and Portfolio Manager of several five star rated muni funds shares his forecast and strategies.
WEALTHTRACK Episode #1234; Originally Broadcast on February 12, 2016
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ROBERT “BOB” DIMELLA
- Co-Head MacKay Municipal Managers
- Co-Portfolio Manager
- MainStay Tax-Free Bond Fund
- MainStay High Yield Municipal Bond Fund
So much for higher interest rates! Federal Reserve Chairwoman, Janet Yellen discussed the possibility of negative interest rates in the U.S. in testimony before Congress today, although she said it was unlikely the Fed would need to cut interest rates soon, let alone go negative. The market is cutting rates for her. The 10-year Treasury note fell to 1.706% today, a one year low.
The world is awash in debt, nearly $200 trillion dollars- worth. More than a quarter of that has been created since the 2008 financial crisis. Central banks around the world are keeping their monetary spigots open and governments have been borrowing at record levels, as have corporations.
For four years in a row blue chip U.S. companies have sold more than a trillion dollars-worth of bonds, reaching a record $1.3 trillion last year. Forecasts are the trillion dollar plus annual trend will continue this year.
With all of this supply, global interest rates near record lows and economies slowing around the world, many investment advisors are telling clients to keep their bond exposure to a minimum.
It was good advice last year. Unless they were very short maturities, most bond categories lost money. The one big exception was tax-free bonds. Municipal bonds made money for investors, outperforming treasuries as well as both investment grade and high yield corporate bonds, and even stocks. What was behind the strong muni showing? Will it continue this year?
This week’s guest, Robert DiMella, is a top rated municipal bond manager. DiMella is Co-Head of MacKay Municipal Managers, which was named the 2015 top manager in the Municipal Fixed Income category by Institutional Investor. DiMella co-manages several municipal bond funds, including the flagship MainStay Tax-Free Bond Fund, which is rated 5-star by Morningstar, and the MainStay High Yield Municipal Bond Fund, which also carries Morningstar’s highest rating.
DiMella will share his perspective on why munis advanced last year while so many other fixed income investments retreated, and why he believes selective munis will outperform this year.
Also, in his EXTRA interview on our website, DiMella will talk about how his work analyzing state finances gives him an inside view of how well different governors manage. Two states stand out, one positive and one negative. Both have governors with national political aspirations.
Have a Happy Valentine’s Day, a wonderful President’s Day holiday and make the week ahead a profitable and productive one.
CONSIDER A MUNICIPAL BOND FUND FOR THE TAXABLE PART OF YOUR PORTFOLIO
- Tax exempt from federal taxes
- Some are exempt from state and local taxes
- Pockets of municipal bond opportunity offering secure and attractive yields and returns
- Can be a minefield financially and politically
No Bookshelf titles this week.
SOLID REVENUE STREAM
- Transportation and infrastructure projects will generate revenue stream for bondholders
- Buy tax-free transportation revenue bonds
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MUNICIPAL MANAGEMENT STYLE
Award winning municipal bond fund manager Bob DiMella runs several 5-star rated funds including MainStay New York Tax-Free Opportunities Fund and MainStay California Tax-Free Opportunities Fund. His work analyzing state finances gives him an inside view of how well different governors manage. Two states stand out, one positive and one negative. Both have governors with national political aspirations.