Bond yields continued their upward ascent in February, with very little pause. It wasn’t like we got any jarring inflation data to pressure yields higher. Rather, it was continued firm economic data, rising commodity prices, and the belief that all of the stimulus combined with the pent-up demand likely to be nleashed by the vaccine-led economic reopening will cause the economy to surge (and possibly overheat).
Considering how low inflation got in March/April 2020 due to the lockdowns, the upcoming year/year comparisons are likely to look ‘hot’. But the Fed has repeatedly said that they are not overly concerned if the economy runs a little hot for a bit. They believe any such spike in inflation will ultimately prove transitory. That said, we would not be surprised to see the Fed start to concentrate their asset purchases towards the long-end of the yield curve to help dampen the pace of the upward trajectory.
It’s normal for bond yields to move higher as the economy enters expansion and GDP growth strengthens. The problem is the current pace of the move higher in yields is unnerving to some market participants. To wit, the 10-yr UST yield began February at 1.10%. By the end of the month it had nearly touched 1.55% – that’s a 40% spike in one-months’ time. But that pace is likely to slow.
As the chart above shows, there has been little technical resistance from about 1.18% up to 1.50%. From here things get a bit tougher, as there are layers of resistance to overcome in the 1.50% to 1.95% area. So we think it’s more likely that higher yields from here will come in a stair-step pattern rather than the steep ramp higher that we have witnessed of late.
The ACM Tactical Income Fund (TINIX) returned -0.24% in January, which was well ahead of the -1.44% return in the Barclays AGG index. Rising bond yields proved a headwind for most income-oriented securities. As many of the income-oriented ETFs to which we allocate broke down recently, cash balances in the Fund have risen. That’s how the Fund acts defensively in a rising rate environment, by decreasing exposure to interest-rate sensitive sectors that are breaking down. The Fund entered February with 3% in cash, but ended the month with roughly 29% in cash.
Positive contributors to performance were mtge REITs, closed-end income funds, and BDCs; while negative factors came from preferreds, emerging market bonds, and munis (high yield and taxable).
We want to thank all of you for your continued support.
Jordan L. Kahn, CFA
Chief Investment Officer
Sources: Standard & Poor’s, Stockcharts.com, Briefing.com
Investors are not able to invest directly in the indices referenced and unmanaged index returns do not reflect any fees, expenses or sales charges. For current performance information, please visit our performance page: http://acm-funds.com/tactical-income-performance/
There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses.
ETF’s are subject to specific risks, depending on the nature of the underlying strategy of the fund. These risks could include liquidity risk, sector risk, as well as risks associated with fixed income securities, real estate investments, and commodities, to name a few. Investments in foreign securities could subject the Fund to greater risks including, currency fluctuation, economic conditions, and different governmental and accounting standards.
Investors should carefully consider the investment objectives, risks, charges and expenses of the ACM Tactical Income Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 1-844-798-3833. The prospectus should be read carefully before investing. The ACM Tactical Income Fund is distributed by Northern Lights Distributors, LLC, member.”http://www.finra.org/” FINRA. “http://www.sipc.org/” SIPC. Northern Lights Distributors, LLC and Ascendant Capital Management, LLC are not affiliated.
February 2021 Fact Sheet
The ACM Tactical Income Fund is designed as a core investment for investors seeking income generation, while also focusing on capital preservation. The fund employs a tactical strategy which aims to capture attractive income opportunities and mitigate downside risk when markets experience downturns.
We strive to help our investors participate in the gains available from financial markets, while mitigating the downside risk
|PERFORMANCE||As of 2/28/2021|
|1-mth||3-mth||YTD||1 Yr*||Since Inception*|
|Barclays US Agg Bond||-1.44%||-2.02%||-2.15%||7.51%||8.11%|
|Morningstar NT Bond||0.21%||1.77%||0.47%||3.44%||5.02%|
*As of 12/31/20
The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. Actual Total Annual Fund Operating Expenses of 2.25% for Class A and 2.00% for Class I from the prospectus. The Fund’s investment adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until April 30, 2021, to ensure that the net annual fund operating expenses will not exceed 2.13% for Class A shares and 1.88% for Class I shares, subject to possible recoupment from the Fund in future years. Maximum sales charge for Class A shares is 5.75%. Please review the fund’s prospectus for more information regarding the fund’s fees and expenses. For performance information current to the most recent month-end, please call toll-free 844-798-3833
As of 2/28/2021
There is no assurance that the Fund will achieve its investment objectives.
Investors should carefully consider the investment objectives, risks, charges and expenses of the ACM Tactical Income Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 1844 798 3833 . The prospectus should be read carefully be fore investing. The Tactical Income Fund is distributed by Northern Lights Distributors, LLC , member FINRA/SIPC. Norther Lights Distributors, LLC and ACM Funds, LLC are no t affiliated.
Mutual funds involve risk including possible loss of principal. Adverse changes in currency exchange rates may erode or reverse any potential gains from t he Fund s Investments. ETF s are subject to specific risks, depending on the nature of the underlying strategy of the fund. These risks include liquidity risk, sec to r risk, as well as risks associated with fixed income securities, real estate investments, and commodities, to name a few. Investments in underlying funds that own s mall and mid capitalization companies may be more vulnerable than larger, more established organizations. Derivative instruments involve risks different from, or possibly great er than, the risks associated with investing directly in securities and other traditional investments. Investments in foreign securities could subject the Fund to greater risks incl u ding, currency fluctuation, economic conditions, and different governmental and accounting standards. In addition to the risks generally associated with investing in securities of foreign companies, countries with emerging markets also may have relatively unstable governments, social and legal systems that do no t protect share holders, economies based on only a few industries, and securities markets that trade a small number of issues.
Investors bear the risk that the Fund may not be able to implement its investments strategies or attract sufficient assets. Purchased put options may decline in value or expire worthless and may have imperfect correlati0on to the value of the Fund’s portfolio securities. Written call and put options may limit the Funds paticipation in equity market gain s and may amplify losses in market de declines. The Fund’s losses are potentially large in a written put or call transaction. If unhedged, written calls expose the Fund to potentially unlimited losses. The Fund w ill incur a loss as a result of a short position if price of the short position instrument increases in value between the date of the short position sale and the date on which an off setting position is purchase. Short positions may be considered speculative transactions and involve special risks, including greater reliance on the ability to accurately anticipate the future value of a security of instrument. The Fund s losses are potentially large in a short position transaction.
Investors are not able to invest directly in the indices referenced in this illustration and unmanaged index returns do not reflect any fees, expenses or sales charges.