Income Monitor: Q1 2019

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.