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Posted by on Apr 12, 2016 in Market Insight, Peritus Asset Management

Zero Sum Game

Zero Sum Game

By Heather Rupp, CFA, Director of Communications and Research Analyst for Peritus Asset Management, Sub-Advisor of the AdvisorShares Peritus High Yield ETF (NYSE Arca: HYLD)

As we close out the first quarter of 2016, investors reading the tea leaves should be concerned.  The price collapse in almost all commodities and the recent severe indigestion in US credit markets reject the notion that the global economy is going to grow at a rate greater than 3%.  With the weakness we are seeing globally and other developed nations focused on further quantitative easing, the idea that the US economy will be unaffected is not realistic.  Demographics remain the elephant in the room; this is no longer a future discussion but one that is now exerting its influence.  Final demand for many goods and services will continue to fall as the globe ages.  Importantly, demand for stocks by both institutional and individual investors looks to be rolling over.  With limited global growth and poor technicals, we believe it is likely we are beginning a secular trend that will compress equity valuations.  As demand moves from equities, we expect it to transfer to credit in this zero sum game.

Within this framework, we believe the high yield market offers investors an attractive alternative to equities and provides investors with the potential for higher yields/income than is available in various other fixed income options.  This market offers income focused investors a way to generate a steady income stream and the potential for capital appreciation to help drive long-term returns.

Although information and analysis contained herein has been obtained from sources Peritus I Asset Management, LLC believes to be reliable, its accuracy and completeness cannot be guaranteed. Information on this website is for informational purposes only. As with all investments, investing in high yield corporate bonds and loans and other fixed income, equity, and fund securities involves various risk and uncertainties, as well as the potential for loss. Past performance is not an indication or guarantee of future results.

The AlphaBaskets blog provides frequent market insight and commentary by AdvisorShares Investments, LLC, created by AdvisorShares and other leading active managers.  AdvisorShares Investments is an SEC-registered investment adviser and the investment adviser to the AdvisorShares actively managed ETFs. The views expressed on AlphaBaskets should not be taken as investment advice or a recommendation for any of the actively managed ETFs advised by AdvisorShares.