Time for a Tactical Tilt at Interest Rate Sensitives
- We remain underweight interest rate sensitive stocks. The rise in global yields has been driven by Fed policy alone, and this looks set to continue for the remainder of this year. However, there are uncertainties about the outlook for 2019. We explore several scenarios to map out potential paths for US 10-year yields.
- Bond yields could consolidate in the near-term. We think 10-year yields are close to their peak for now and could fall over the next few months against a broader backdrop suggesting they move higher over the medium term.
- Tactically Move Overweight, APA, TCL, MQA, SYD. These stocks have rallied in the past couple of weeks and could rally further should bond yields consolidate further.
- VVR should also be considered as a Tactical Overweight Candidate. VVR is sensitive to bond yield movements over both the shorter and longer-term.
- Linking Dividend Risk to Interest Rate Risk. Unregulated and Regulated Infrastructure stocks generally have rising interest rate and dividend risk. In Property and Telcos, the relationship between interest rate risk and dividend risk is less clear, but stocks in these sectors still trade as bond proxies.
AGL Energy is a renewable energy company, serving customers throughout eastern Australia. Co. has four segments: Energy Market, which sells electricity, natural gas, and energy related products and services to consumer market, business and wholesale customers, servicing approximately 3.7 million customer accounts as of June 30 2016; Group Operations, a diverse power generation portfolio; New Energy, which focuses on taking new and distributed technologies to market in Australia, including AGL Solar, and Distributed Energy Services such as Active Stream, its digital meter installation and data provider business; and Investment, which include investments in various energy related business.
Macquarie Atlas Roads Group is a global infrastructure developer and operator. As of Dec 31 2015, Co.'s investments consisted of 20.14% interest in Autoroutes Paris-Rhin-Rhone, a 2,323 km motorway network located in the east of France; 50% interest in Dulles Greenway, a 22 km toll road in Loudoun County, northern Virginia, U.S.; 70% interest in Warnow Tunnel, a two km toll road and tunnel under the Warnow River in the northern German city of Rostock, Germany; and 100% interest in M6 Toll, a 43 km motorway that bypasses Birmingham and connects to the existing M6 at both ends in West Midlands, U.K.
Charter Hall Long Wale REIT is engaged in property investment. The Trust's investment objective is to provide investors with stable and secure income and the potential for both income and capital growth through an exposure to a property portfolio with a long WALE.
Transurban Group is engaged in the development, financing, operation and maintenance of toll road networks as well as management of the associated customer and client relationships. Co. manages and develops urban toll road networks in Australia and the U.S. Co. owns concession assets across four key market segments: Victoria, New South Wales, Queensland and the Greater Washington Area.
Viva Energy REIT is engaged in owning a portfolio of service station properties, with an portfolio of 425 service stations across all Australian states and territories. Co. is a stapled group consisting of the 'Company' and the 'Trust'. The Trust, through its 100% ownership of VER Trust, owns the portfolio service station properties and receives rent under the leases. Co.'s investment objective is to own a portfolio of strategically located Australian service station properties subject to long-term leases To Viva Energy Australia and other tenents with strong credit portfolios.
Westfield is engaged in the ownership, development, design, construction, asset management, leasing and marketing activities with respect to its U.S. and U.K. portfolio. Co.'s operational segment comprises the property investment and the property and project management segments. Property investments segment includes activities related to existing shopping centres and completed developments. Property and project management segment includes property management and development for third parties.
About us:
- The business is a Proprietary Limited Australian company that is owned and fully operated by Shane Lee from a small office in Sydney’s CBD.
- Shane worked for 17 years in Sydney-based senior research roles (economist, equity strategist and bond strategist) in global and regional investment banks and a domestic commercial bank prior to starting Macro Strategy Advisors. These roles straddled the asset classes making him uniquely positioned to advise multi-asset investors. He worked for the Reserve Bank of Australia (RBA) for 3 years as a housing, commercial property and equity market analyst and a liquidity forecasting specialist. He worked as a structural engineer in Queensland for 10 years prior to his career at the RBA.
Aim of our business:
- To partner with our clients in their aim to maximise returns. We provide timely, independent and thought-provoking research on thematic macro issues that are impacting or could impact financial markets. We aim to produce research that prompts our clients to question their assumptions.
Services:
- A fortnightly research note.
- Regular presentations and data support delivered by understanding our clients interests and investment process.
- We also in work in confidence to investigate, analyse and report on issues at our clients direction. This work is done on a project-by-project basis.
- As an Australian based business, the main focus is analysing how domestic and global issues impact Australian investors. However, our global and domestic insights are also valued by our offshore clients.
Our Edge:
- Our low cost base relative to our competitors allows us to provide a quality product at a reasonable cost.
- We are fully independent and don’t support a banking function or any third party. We have no interests other than providing our clients with the best possible research.
- Our focus is not point forecasting, but providing rigorous analysis and insight. We don’t routinely focus on the top or bottom 10% of likely outcomes to create a headline.
- Shane’s background in engineering has provided clients with unique insights into global infrastructure and domestic housing issues.
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