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Stocks Make a New High

By David O'Malley | September 18, 2017

The S&P 500 closed above the 2,500 mark for the first time on Friday. The markets ended a strong week of gains driven by continued favorable conditions for economic growth and the prospects for potentially bipartisan action coming out of Washington.

Corporate Bond Credit Quality Moving Lower with Yields

By Mark Heppenstall | September 7, 2017

This week’s chart highlights the dramatic shift in credit quality for the corporate bond market during the past 30 years. Investment grade rated corporations have been on a 30-year borrowing binge judging by the increasing weight of BBB-rated credits in the Bloomberg Barclays Corporate Index. U.S. companies are taking advantage of lower and lower borrowing costs and embracing the use of higher leverage. Nearly half of the index is made up of BBB credits today ─ double the level from 30 years ago. Despite more than 60 companies being rated AAA in the 1980s, only Johnson & Johnson and Microsoft remain as the two U.S. companies with the top rating.

How Long Will our ‘Goldilocks’ Economy Under Trump Last?

By Penn Mutual Asset Management | August 9, 2017

Penn Mutual Asset Management CIO Mark Heppenstall contributed an article to The Hill where he discusses the current gridlock in Washington, the “new normal” economic environment and investment trends amid low volatility. Mark anticipates all these factors will extend the credit cycle into extra innings and enable the Fed to be patient with future rate hikes.

Investors Watching for Clues in the Federal Reserve Meeting and Second Quarter GDP This Week

By David O'Malley | July 24, 2017

Last week, markets traded mainly range bound as economic data and corporate earnings met expectations. In the week ahead, market participants will be closely watching for any clues from the Federal Open Market Committee (FOMC) statement on Wednesday. The Federal Reserve is widely expected to keep interest rates unchanged, but the meeting could provide important information on future policy.

30-Year Swap Spreads Get a Boost Wider from Capital Relief

By John Swarr | July 6, 2017

Second quarter U.S. dollar (USD) interest rate markets were very unexciting when looking at absolute movements in both swap rates and Treasury yields. However, an interesting development arose concerning the relative movement between the 30-year points of these two curves that will likely have the attention of market participants through the end of the year. The 30-year swap spread – defined as the difference between the 30-year swap rate and 30-year Treasury yield – has widened (or become less negative) significantly since June 13th, when the Treasury released its recommendations for financial industry reform, including a proposal to remove U.S. Treasuries (USTs) from the denominator of the supplementary leverage ratio (SLR) calculation. This proposal would effectively make USTs “cheaper” for banks to hold from a capital requirement perspective.

Beware of a Flattening Yield Curve

By David O'Malley | June 19, 2017

In a much anticipated move last week, the Federal Reserve (Fed) increased short-term interest rates by 25 basis points (bps). The Fed also outlined parameters for shrinking its $4.5 trillion balance sheet. Once the process begins, it is expected to take at least four years to reduce the balance sheet by approximately $2-2.5 trillion.

CMBS Market Opportunities in Risk Retention

By Jennifer Ripper | June 8, 2017

In December 2016, the commercial mortgage-backed securities (CMBS) market officially adopted risk retention rules as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The rules were designed to promote an alignment of interests between sponsors and investors. Risk retention requires lenders originating loans to retain a 5% slice of each CMBS deal for five years, thereby forcing issuers to have ‘skin in the game.’

May Employment Report Comes in Below Expectations and Raises Questions about the Economy and Fed

By David O'Malley | June 5, 2017

The May employment report was released on Friday and was weaker than expected. On the positive side, the unemployment rate fell to 4.3% from 4.4% in April. The current level of unemployment should be putting upward pressure on wages; however, the non-accelerating inflation rate of unemployment (NAIRU) appears to be lower than most experts predicted. Average hourly earnings, which I have been watching closely, increased by a disappointing 0.2% in May, leaving the year-over-year increase at a stable 2.5%.

Animal Spirits Reignite as M&A Activity Surges

By Scott Ellis | May 25, 2017

It has been a very strong run for the markets since the great recession in 2008/2009. The S&P 500 Index has returned over 200%1 since 12/31/08, and the U.S. High Yield Market is not far behind at over 180% (as measured by the Bank of America Merrill Lynch U.S. High Yield Index). Following such strong runs over the past 8+ years, one has to wonder how much longer this can be sustained.

Staying Focused on the Big Picture

By David O'Malley | May 22, 2017

Over the past few months, I have been asked many times how to factor the news cycle and developments in Washington into market expectations. My view on this has not changed with the events of the last few weeks. If you are a long-term investor, you have to look past the short-term noise that is the news – be it political or financial – and stay focused on the primary drivers of the market, including valuation, economic growth, monetary policy and regulation. If you are a trader, you need to be more aware of the noise, but recognize it can be extremely difficult to predict. As a result, I have always tried to discount news items or reduce my trading in times of significant event risk.



Disclosure Statement

This blog post is for informational use only. The views expressed are those of the author, Dave O’Malley, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client.  Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.

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Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice.  The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete.  Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements.  Actual results may differ significantly.  Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.  All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.

High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.

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