During the Q4 of 2019, Treasury yields rose in the maturity range of two years out to thirty years, with the biggest increase being the yield for the 10-year. As of December 23, the 10-year Treasury had risen 24.5 bps to 1.911%. The Fed did elect to lower the fed funds rate again at the end of October, to 1.50%–1.75%, which caused Treasury yields shorter than one year to decline and marked the third rate cut since July. The steepening yield curve during the quarter benefited our portfolios as we were positioned defensively, which cushioned the blow of rising yields.
At the most recent FOMC meeting in December, the Fed signaled that they will look to be on hold as markets digest the three previous cuts. The statement accompanying the meeting continued to describe growth as “moderate” and unemployment as “low.” We expect the Fed to remain data-dependent going forward as they look to navigate changing economic conditions.
With the Fed on hold and the inverted yield curve behind us for now, we are continuing to manage portfolios defensively, as we expect rates to continue trending higher into next year. While being defensive hurt us earlier in the year, the tide has begun to turn; and portfolios have benefited as yields have gone higher. We will continue to be conservative in a low-interest-rate environment and look to extend durations and take advantage of market conditions as opportunities become available.
Daniel Himelberger
Portfolio Manager & Fixed Income Analyst
Email | Bio
In addition to Dan’s commentary here, it’s that time of year when the rest of the Team at Cumberland Advisors provide their Q4 Reviews.
We may discuss what we favor, cash positions, warning signs, and what we see as opportunities. Read more Q4 Reviews to learn about the thinking behind our positioning of portfolios and how we execute strategies at this link: https://www.cumber.com/2019-q4-reviews/
Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.
Sign up for our FREE Cumberland Market Commentaries
Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.
