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Income Monitor: Q1 2019

Jun 17, 2019

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Rohan Reddy

The Global X Income Monitor for this quarter can be viewed here. This report seeks to provide broad, macro-level insights into the income characteristics of various asset classes and strategies.

Q1 proved to be a rebound period not only for stocks, but also for income-oriented investments as well. The downward shift in the US Treasury yield curve drove prices higher in both equities and bonds. Rate-sensitive fixed income instruments like preferreds and high yield bonds benefitted from this trend given their sensitivity to duration.

Future expectations of further dovish monetary policy changes have also propelled income investments. The futures curve is pricing in multiple rate cuts through the rest of 2019 and potentially even additional cuts in 2020. The uncertainty created from trade wars and slowing global growth is driving these concerns. If rate cuts materialize, we believe investors will need to look beyond bonds to meet their income needs, such as high dividend strategies, preferreds, covered calls, and MLPs.

We believe MLPs look attractively priced, with yield spreads above historical averages. In addition, we favor preferreds over other asset classes with comparable yields like high yield bonds where credit risk concerns remain elevated. We believe Preferreds offer better credit quality characteristics with similar yields.

Category: Articles

Topics: Dividends, Income Strategies, MLPs, Preferreds

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Investing involves risk, including possible loss of principal. High yielding stocks are often speculative, high-risk investments. These companies can be paying out more than they can support and may reduce their dividends or stop paying dividends at any time, which could have a material adverse effect on the stock price of these companies.

Bonds and bond funds will decrease in value as interest rates rise. High yield bonds involve greater risks of default or downgrade and are more volatile than investment grade securities, due to the speculative nature of their investments.

Preferred stock is subject to many of the risks associated with debt securities, including interest rate risk. In addition, preferred stock may not pay a dividend, an issuer may suspend payment of dividends on preferred stock at any time, and in certain situations an issuer may call or redeem its preferred stock or convert it to common stock.

Carefully consider the funds’ investment objectives, risks, and charges and expenses. This and other information can be found in the fund’s full or summary prospectus, which may be obtained at globalxfunds.com. Please read the prospectus carefully before investing.

Global X Management Company LLC serves as an advisor to Global X Funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Global X Management Company LLC. Global X Funds are not sponsored, endorsed, issued, sold or promoted by Solactive AG, FTSE, Standard & Poors, NASDAQ, Indxx, or MSCI nor do these companies make any representations regarding the advisability of investing in the Global X Funds. Neither SIDCO nor Global X is affiliated with Solactive AG, FTSE, Standard & Poors, NASDAQ, Indxx, or MSCI.