MacKay Shields LLC

Our upcoming video series looks at how using multiple diversified sources of return may create flexibility to respond to changing opportunities → https://lnkd.in/ekXrSWfz 1. Michael DePalma highlights the overlooked benefits of discounted bonds, which in our view offer greater risk mitigation during market downturns and potential enhanced gains during rallies. 2. Zachary Aronson explores yields in non-agency commercial mortgages and asset-backed securities, despite current challenges. 3. Neil Moriarty discusses opportunities in what we believe are undervalued areas such as commercial real estate as market spreads tighten. 4. Sanjit Gill, CFA emphasizes the value of taxable municipal bonds, which may provide improved yields and credit quality, especially in a rate-cutting cycle. #FixedIncome #Bonds #PortfolioManagement #Munis #RealEstate #Credit

I have seen a number of headlines about consumers pulling back on discretionary spending, and while I am sure this is the case for many households, in the aggregate it is very hard to see any meaningful signs of slowing, including in the August personal income and outlays report. My base case is for a continuation of solid discretionary spending: the labor market will likely continue to slow a bit but overall remains in good shape with decent real wage growth. And with the shift to monetary policy easing, financial conditions have eased considerably, which will be supportive of further household wealth accumulation – another important driver of spending. Throw in the upward revisions to household savings and gradually easing consumer credit conditions, and the overall picture remains one of household spending staying on a very solid footing for the foreseeable future.

This Hispanic Heritage Month we’re proud to celebrate with Tanya Garzon co-chair of New York Life’s Latinos for Excellence, Advancement & Development employee resource group (ERG).

Check out Steven Friedman‘s latest post FOMC commentary below.

Check out the latest “Masters of the Muniverse” episode from Bloomberg Intelligence’s FICC Focus podcast, where John Loffredo dives into the evolving municipal bond landscape and explores how risk-managed relative value approaches can reveal new opportunities.   MacKay Municipal Managers | New York Life Investments | #MunicipalBonds

In his speech today, Fed Governor Waller indicated a willingness to front-load rate cuts if needed. While a 50 basis point cut in September does not appear to be his base case, I think there is a strong case to start the easing cycle with a large move. First, the labor market is still in decent shape, but the direction of travel seems clear enough – without sustained easing the labor market is likely to cool quite a bit further. Second, receding inflation risks now give the FOMC the flexibility to focus on preventing labor market weakness. Third, the recent easing in financial conditions can support growth and increase the odds of a soft landing. But sustaining these easier conditions requires validating a rate path that is close to what is already discounted in markets. At the end of the day, the policy stance is overly restrictive relative to the increase in the unemployment rate and the decline in inflation that has occurred since the FOMC raised the federal funds rate to 5.5 percent over a year ago. There are a number of arguments I hear for starting with a 25 basis point cut. The first is that the FOMC has reserved large cuts for emergencies hence starting the cutting cycle with a 50 basis point move could set a bad precedent. I would counter that we are in unique circumstances, with a policy rate far above a neutral setting that is no longer justified by the data. In my view, the more modest mid-cycle adjustments in 1995 and 2019, both of which started with 25 basis point cuts, occurred when policy was less restrictive than it is today. The second argument is that a larger rate cut could look panicky and lead market participants to price in a series of larger moves or a much weaker outlook. That’s possible, but let’s not forget the FOMC’s communication tools. The September Summary of Economic Projections and Chair Powell’s press briefing can be used to signal that the Committee decided to front-load cuts simply to recalibrate policy given that the balance of risks has shifted towards further labor market weakness, and not because their base case has changed. In particular, the projections can signal that a somewhat faster descent in the policy rate towards neutral will stabilize GDP growth and the unemployment rate around current levels. And the projected rate path can imply a base case of 25 basis point adjustments in subsequent meetings. A third argument is that starting with a large cut – which would presumably be followed by 25 basis point moves in November and December – could backfire if inflation picks back up. But let’s not forget that even with 100 basis points of cuts this year, the policy stance would remain restrictive, leaving the Committee positioned to respond to any renewed price pressures.

MacKay Shields’ Aronson On Securitized Fixed Income Investments Watch Now: https://lnkd.in/ekg_yuTq #RIA #RIAChannel MacKay Shields LLC New York Life Investments Zachary Aronson

MacKay Shields’ Susser On The High-Yield Bond Market Watch Now: https://lnkd.in/eSweX-Ne #RIA #RIAChannel #Bond #HighYield MacKay Shields LLC New York Life Investments Andrew Susser

In our latest sit-down, Michael DePalma discusses factors that help identify whether a period of heightened market volatility presages a major shift in the market outlook, or is more likely to peter out with a return to previous market trends. He also details how these factors influenced portfolio adjustments amid August’s market swings, and what we may be able to infer about the road ahead.

#MacKayMoments | Employee Spotlight – Drew Schuchman Learn more about Drew Schuchman, Analyst at MacKay Shields in our latest Employee Spotlight! Click here to view more about MacKay Shields: https://bit.ly/3T602aS