Investment strategy
August 10, 2021
1 min

Exploiting volatility in the age of low rates

August 10, 2021
1 min
David Bailin
Chief Investment Officer
Steven Wieting
Chief Investment Strategist and Chief Economist
Lighthouse in rough seas
SUMMARY

Seeking portfolio income has seldom proved more challenging. But equity market volatility may offer a potential opportunity for yield-seeking investors.


The US economy grew at a 6.4% pace in 1H 2021 and added 4.3 million jobs in the year-to-date. A record 9.2 million job openings remain to be filled.  Despite growth momentum and a near-term spike in inflation, even the longest-term US government bond yields remain below 2%. Globally, nearly $17 trillion USD-equivalent of bonds have negative yields, even before accounting for inflation. 

Some central banks continue to purchase bonds and may continue to do so for years to come. As a result, we believe that current yields are insufficient to reach almost any portfolio income goal.   But given that realized equity market volatility has averaged less than implied volatility for more than a decade, there are strategies to gain exposure to equities OR achieve an enhanced yield that may improve portfolios in a “yield repressed” world.  

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