The Bramshill Income Performance Strategy returned -0.02% in July, resulting in a +2.41% YTD total return.
During the past month, US treasury yields have been rangebound as the market has digested the news of numerous trade deals which were negotiated and agreed upon by the administration. The risk markets have reflected a growing consensus that the impact of such trade deals on growth and inflation will be much more muted than many forecasts from early April around the time of Liberation Day. Our view has not wavered in that we continue to believe tariffs are a more of a hindrance to growth than a trigger of inflation, similar to what happened in 2018-2019 when the first round of China tariffs were imposed. We believe the weak July unemployment report which contained numerous downward revisions to previous months is reflective of a slowing economy. At the most recent Fed meeting, the Fed held rates steady, however, there were two dissenting votes in favor of a 25bp rate cut which reflects the greater likelihood of 1 to 2 cuts by year end. Additionally, the US Treasury formally announced in its refunding announcement at the end of July what we have mentioned in previous commentary, that is, no increase to long duration treasury issuance, and all of the increase in front end issuance. Furthermore, they announced an increase to buybacks of long-end treasuries, a further step towards yield curve control. Thus, we have maintained the duration in our portfolio. Our largest asset class allocation remains within investment grade corporate bonds. If you recall, in June we had increased this allocation from approximately 38% to 42%. We added to a short duration position in WFC and a long duration CG bond but otherwise maintained this 42% allocation. In preferreds, we increased our allocation from approximately 16% to 19% as we added to our BAC 6.3% PFD position as well as a liquid preferred ETF. This sector has lagged other spread sectors such as investment grade and high yield corporate bonds. One note, we exited a position in EIX 5.375% PFD due to the uncertainty of the California Utility Reserve Fund (the “Wildfire Fund”) which was created in 2019 to provide claim-paying capacity as a backstop for investor-owned utilities such as EIX. However, the large, anticipated payout for the California fires which took place earlier this year, could exhaust this Fund and thus impact EIX if future fires were to occur. Without the Fund’s backstop, EIX would face significantly higher credit risk. Our high yield and municipal allocations remained stable on the month at approximately 3% and 1%, respectively. Our long duration treasury exposure also remained stable at approximately 20% of the Strategy. We reduced our allocation to cash and short-term treasuries from approximately 17% to 14% as we moderately deployed this liquidity to purchase more preferred securities.
This commentary is provided by Bramshill Investments, LLC for information purposes only and may contain information that is not suitable for all investors. Certain views and opinions expressed herein are forward-looking and may not come to pass. Investing involves risk, including the potential loss of principal. Past performance may not be indicative of future results, which are subject to various market and economic factors. No statement is to be construed as an offer to sell or a solicitation of an offer to buy securities or the rendering of personalized investment advice. Stated performance is reflective of realized/unrealized capital gains/losses and investment income achieve in composite accounts, net of investment management fees and expenses for trading, custody and fund maintenance (where applicable). Returns reflect the reinvestment of dividends and other such distributions and performance for January 2009 through April 2012 depicts actual returns generated by the strategy while managed by the Firm’s Chief Investment Officer at an unaffiliated investment firm. All information is accurate as of the date of publication and is subject to change without notice.
