NYMTG - Strategies For Growing Income In 2025 - Part 2

2025-01-31 11:35:04 ET

Summary

• We take a look at sustainable strategies to grow income in investor portfolios.
• These strategies include keeping an eye on floating rates and associated coupon resets, risk rotation, leverage compensation, relative value and others.
• We also highlight a number of assets that are aligned with these strategies.

Growing income remains one of the hallmarks of successful income investing. In this Part 2 follow-up article, we discuss sustainable strategies for growing income. Take a look at Part 1 for strategies that, while popular, are unlikely to match investor expectations and goals. We also highlight some of our picks for each associated strategy.

1. Take Short-Term Rates Into Account

The first strategy is simply aligning portfolio allocation in the direction of short-term rates. As the following chart shows, unlike nearly all other assets, short-term rates tend to trend monotonically over extended periods of time. This is clearly linked to the fact that Fed policy is tilted in a certain direction while moving incrementally. The Fed manages their cutting and hiking cycle gradually given the old adage of monetary policy working with "long and variable lags" and the overall uncertainty of how monetary policy is impacting the economy....

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