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“Everything we deal with is significantly cheaper than it was six - 12 months ago.” - Howard Marks
Edit: Today’s action in junk bonds so far at least so far not as negative as it may appear. Although down, the junk ETFs are still trading well above Friday’s NAV meaning the open end may be up today.
I can confirm a very slight uptick on Friday, 08 July, '22: TUHYX = +0.25%. My only bond fund now. 10.69% of total.
This may be helpful as a point of reference. Ben Carlson recently looked back at every bear market since WWII and the corresponding peak-to-trough and breakeven periods. On average, these bear markets lasted 12 months and it took 21 months for investors to breakeven. Link
Thanks @Observant1. The more recent bear markets from 2000-2002 and 2008 had long recovery periods well beyond 12 months and more. That was including the Fed are cutting the interest rate multiple times. 2020 COVID bear market was an abnormality, and it should not be use as an example of quick recovery.
Howard Marks specializes in distressed debt ala junk bonds, bank loans, etc. Over the past several months I have continually read about how junk bonds offer value from various pundits. All the while it is one new low after another for junk bonds. So much so that the first half decline of 14% was the worst first half decline ever for the junk bond market.
What is particularly ominous is how detached junk bonds have been from equities and Treasuries. Meaning while equities had a vicious bounce a few weeks ago, junk and bank loans just kept making new lows. While Treasuries are having a nice recovery presently still new lows in the risk on credits aka junk and and bank loans. Below is a link to Morgan Stanley’s outlook for junk. Sounds much more objective and reasoned than much of what I have read recently
Edit: Obviously as with Treasuries recently, these markets can turn on a dime. And junk bonds are notorious for strong recoveries after bear declines. Coming off the 2008 bear market in 2009 junk had the greatest credit rally of all time rising over 50%.
Edit: Today’s action in junk bonds so far at least so far not as negative as it may appear. Although down, the junk ETFs are still trading well above Friday’s NAV meaning the open end may be up today.
Probably much ado about nothing but have a 7% position in VWEHX and hoping to increase as 7% barely moves the needle. Liked how on Tuesday intraday with the Dow down 600 points the cash junk market was up. First time in many a moon I had seen that type of intraday divergence. Junk had a decent week but 2022 has been a year of fake out rallies so buyer beware.
Funny how the intraday action of one day can set the tone for the weeks to come. Junk has been on a roll and on some days (like on July 5) regardless of negative action in stocks or bonds. We are coming off historic lows in default rates for junk bonds. So unless we are going to get the mother of all recessions with soaring default rates, junk offers a lot of value after its first half decline of 14%. Especially the junkiest of junk the CCC category. Bank loan/floating rate funds too are looking good. My 7% allotment there is now at 28% and increasing (and another 15% in floating rate) and in hindsight wish I had been far more aggressive. But then who knows, maybe yet again just another failed rally. Some pundits out there are saying based on the price action of last Friday and yesterday the stock market bear market is dead and over. We shall see.
Comments
I can confirm a very slight uptick on Friday, 08 July, '22: TUHYX = +0.25%. My only bond fund now. 10.69% of total.
We have to be little more patience
Have you data to support your "100%" statement? There are folks who want to know this to be accurate, yes?
Catch
Ben Carlson recently looked back at every bear market since
WWII and the corresponding peak-to-trough and breakeven periods.
On average, these bear markets lasted 12 months and it took 21 months for investors to breakeven.
Link
Sorry meant most [not 100%] and after modern Era (after ww2)
https://m.youtube.com/watch?v=6yzbzJ5ety8&t=149s
(At 2.42)
https://www.mymoneyblog.com/sp-500-bear-bull-market-historical-list.html
https://m.youtube.com/watch?v=6yzbzJ5ety8&t=149s
Could be long summer, maybe more pains /significant downturns another 15% -25% haircut ahead for 3-6 more months know.
Hope we maybe be little better by late fall /winter 2022 and recovery formation in spring
Buffett- nobody in Wallstreet know!!
Have a good week to All, Derf