Public Fund Investment Strategies

Transcription

1 Public Fund Investment Strategies Michael B. Fink, CPM Managing Director Will Bach, CFP Vice President Brad Drager, CRPS Financial Advisor Miamisburg Ohio Office Raymond James Innovation Drive Suite 160 Miamisburg, Ohio Raymond James & Associates, Inc., Member New York Stock Exchange/SIPC

2 1. Historical Perspective 2. Market Themes / Forecasts 3. Monetary Policy 4. Investment Strategy

3 Economics The Dismal Science

4 HOW TO GROW AN ECONOMY Classical Growth Theory Neoclassical Growth Theory New Growth Theory

5 (Source: First Trust Portfolios)

6 (Source: First Trust Portfolios)

7 (Source: First Trust Portfolios)

8 (Source: Dealogic)

9 (Source: Vining Sparks)

10 (Source: Vining Sparks)

11 (Source: Vining Sparks)

12 (Source: Vining Sparks)

13 (Source: Vining Sparks)

14 (Source: Vining Sparks)

15 US Aggregate Reserves Depository Institutions (Source: Bloomberg LP)

16 Federal Reserve Forecast (Source: Bloomberg LP)

17 Contributor Composite Forecast (Source: Bloomberg LP)

18 Taylor Rule (Source: Bloomberg LP)

19 KEY TAKEAWAYS: The U. S. economy continues to recover from the Great Recession; however, the pace of improvement remains muted given slack in the labor market. Fed officials continue to indicate that the decision to raise short-term interest rates will be data dependent, with most Fed officials expecting to begin raising rates some time in Normalization of monetary policy is Fed Chair Yellen s key challenge, and the bottom line is that monetary policy in 2015 will depend on the evolution of the economy during the remainder of 2014 and into early 2015.

20 Current 2yr -5yr Spread 113 Bps High over last 37yrs 154 Bps (Source: Bloomberg LP)

21 Why Discounted Agency Securities?

22 Purchased 4Yr 1.3% Coupon FNMA Purchased 9/9/13 at 98.7 to Yield 1.64% to Maturity New Issue 4Yr Priced with a Yield to Maturity of 1.69% Due to Steepness in Yield Curve Bond Called 5.5 Months on 2/21/14 Yielding Client 4.24% (Source: Bloomberg LP)

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27 Current Market Rates 10/7/14 Short-Term Investment Options MM Mutual Funds Rates.01%-.05% Bank MM.01%-.20% Star Ohio.04% Star Ohio Plus.2% ICS Insured Cash Sweep (Source: Bloomberg LP, Raymond James).25% Security Terms Treasury Agency (Non Callable) Agency (Callable) CD's 3 Month.005% N/A N/A.30% 6 Month.04%.07% N/A.30% 1 Year.086%.19% N/A.50% 2 Year.50%.625%.69% 1.05% 3 Year.94% 1.15% 1.22% 1.50% 5 Year 1.62% 1.77% 2.08% 2.15%

28 Current Investment Strategies Current Public Fund Investment Strategies Short (6-Month to 2-Year) Non Callable CD s Intermediate (2-Year to 4-Year) Long (4-Year to 5-Year) Non Callable CD s, Callable Discounted Agency Bonds & High Initial Coupon Step Up Bonds Callable Agency Step-Up Bonds & Non Callable CD s

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30 DISCLOSURE Diversification does not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. This communication is intended to improve the efficiency with which Financial Advisors obtain information relevant to their client's taxable fixed income holdings. This information should not be construed as a directive from the RJ&A Taxable Fixed Income Department to buy or sell the securities noted above. Prior to transacting in any security, please discuss the suitability, potential returns, and associated risks of the transactions(s) with your financial advisor. The information contained herein has been prepared from sources believed reliable but is not guaranteed by Raymond James & Associates, Inc. (RJA) and is not a complete summary or statement of all available data, nor is it to be construed as an offer to buy or sell any securities referred to herein. Trading ideas expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. Investors are urged to obtain and review the relevant documents in their entirety. RJA is providing this communication on the condition that it will not form the primary basis for any investment decision you may make. Furthermore, because these are only trade ideas, investors should assume that RJA will not produce any follow-up. Employees of RJA or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within. RJA and/or its employees involved in the preparation or the issuance of this communication may have positions in the securities discussed herein. Securities identified herein are subject to availability and changes in price. All prices and/or yields are hypothetical examples for illustrative purposes only. They are not intended to reflect the actual characteristics of any security. Additional information is available upon request. To learn more about the risks and rewards of investing in fixed income, please access the Securities Industry and Financial Markets Association s Learn More section of investinginbonds.com, FINRA s Smart Bond Investing section of finra.org, and the Municipal Securities Rulemaking Board s (MSRB) Electronic Municipal Market Access System (EMMA) Education Center section of emma.msrb.org. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. Raymond James Financial Services, Inc., member FINRA/SIPC.