Rising Interest Rates And 30-Year High Inflation – How We Are Pivoting

At TRC we have been rewarded with the ability to think outside the conventions of a standard or a vanilla 60/40 portfolio (i.e., a 60% equity and 40% US government bond portfolio).    TRC has outperformed almost every major equity and debt benchmark in the last two years.  This has occurred, despite, the fact that in the last two years, Treasuries especially safe short-term 1-year and 2-year US treasuries have declined over 50% because of rapidly rising interest rates engineered by the Federal Reserve and Chairman Powell to fight escalating inflation.  Meanwhile, the stock market has declined into the bear market territory and a result it is giving back over two years of performance.

 I have emphasized buying floating-rate corporate loans which have the buffer of an increasing SOFR floor (Secured Overnight Financing Rate) which is now close to 2.2% up from .05% last year.  SOFR is a broad measure of borrowing cash overnight collateralized by US Treasury securities in the Repurchase Market, commonly called “the Repo market”.  We have also sought out fixed-to-floating rate preferred stocks to buffer against a rising rate environment.