We hosted our quarterly webcast last week where members of the investment team reviewed the first half of 2014 and presented our outlook for the remainder of the year. Our main theme of the second quarter was the lack of financial market volatility and the risk of this reversing as the Federal Reserve continues to withdrawal monetary stimulus from the financial markets. With employment and inflation moving closer to Fed targets, we believe that monetary policy normalization (via an increase in interest rates) is on the horizon and may happen sooner than market participants expect. In municipals, lower supply and strong demand have driven solid performance thus far in 2014. We expect supply to increase slightly in the months ahead and believe that demand will be driven by retail flows, which may be adversely affected by rising rates as well as credit stories such as Puerto Rico. In taxables, we have increased the allocation to “dry powder” sectors such as Treasury and Agency bonds in anticipation of better entry points to "spread" bonds down the road.
If you would like replay details of the webcast, please contact our Client Service Team (firstname.lastname@example.org).