The first quarter earnings season is largely in the books, and it was excellent. In fact, S&P 500 earnings per share (EPS) would have been up double digits in the quarter if not for a big loss Bristol Myers Squibb (BMY) absorbed in an acquisition.

Since millions of homeowners refinanced mortgages to extremely low rates a few years ago, the economy is less sensitive to interest rate policy. In fact, the Jackson Hole Economic Policy Symposium sponsored by the Kansas City Federal Reserve in August will debate the effectiveness and transmission of monetary policy because of these post-COVID-19 dynamics, likely revealing important investment implications. 

It continues to be a challenging environment for a lot of fixed income markets, especially higher quality markets. With the Federal Reserve (Fed) seemingly unlikely to lower interest rates until after the summer months (at the earliest), the “higher for longer” narrative has kept a lid on any sort of bond market rally. And while falling interest rates help provide price appreciation in this higher-for-longer environment, fixed income investors are likely better served by focusing on income opportunities. That’s where preferreds come in. With yields still elevated relative to history, we think preferred securities are an attractive option for income-oriented investors.

With the Federal Reserve (Fed) pointing to higher-for-longer monetary policy last week (before Friday’s softer jobs report), we also explore how stocks perform during prolonged Fed pause periods.