Fourth Quarter 2023 Fixed-Income Sector Views (2024)

Sector-Specific Outlooks In This Report

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Investing involves risk, including the possible loss of principal. The potential impacts of the COVID-19 outbreak are increasingly uncertain, difficult to assess and impossible to predict, and may result in significant losses. Any adverse event could materially and negatively impact the value and performance of our strategies and their ability to achieve their investment objectives. Investments in bonds and other fixed-income instruments are subject to the possibility that interest rates could rise, causing their value to decline. Investors in asset-backed securities, including mortgage-backed securities, collateralized loan obligations (CLOs), and other structured finance investments generally receive payments that are part interest and part return of principal. These payments may vary based on the rate at which the underlying borrowers pay off their loans. Some asset-backed securities, including mortgage-backed securities, may have structures that make their reaction to interest rates and other factors difficult to predict, causing their prices to be volatile. These instruments are particularly subject to interest rate, credit and liquidity and valuation risks. High-yield bonds may present additional risks because these securities may be less liquid, and therefore more difficult to value accurately and sell at an advantageous price or time, and present more credit risk than investment grade bonds. The price of high yield securities tends to be subject to greater volatility due to issuer-specific operating results and outlook and to real or perceived adverse economic and competitive industry conditions. Bank loans, including loan syndicates and other direct lending opportunities, involve special types of risks, including credit risk, interest rate risk, counter-party risk and prepayment risk. Loans may offer a fixed or floating interest rate. Loans are often generally below investment grade, may be unrated, and can be difficult to value accurately and may be more susceptible to liquidity risk than fixed-income instruments of similar credit quality and/or maturity. Municipal bonds may be subject to credit, interest, prepayment, liquidity, and valuation risks. In addition, municipal securities can be affected by unfavorable legislative or political developments and adverse changes in the economic and fiscal conditions of state and municipal issuers or the federal government in case it provides financial support to such issuers. A company’s preferred stock generally pays dividends only after the company makes required payments to holders of its bonds and other debt. For this reason, the value of preferred stock will usually react more strongly than bonds and other debt to actual or perceived changes in the company’s financial condition or prospects. Investments in real estate securities are subject to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns.

Basis point: One basis point is equal to 0.01 percent. Likewise, 100 basis points equals 1 percent. Beta: Beta is a statistical measure of volatility relative to the overall market. A positive beta indicates movement in the same direction as the market, while a negative beta indicates movement inverse to the market. Beta for the market is generally considered to be 1. A beta above 1 and below -1 indicates more volatility than the market. A beta between 1 to -1 indicates less volatility than the market. Dry Powder refers to highly liquid assets, such as cash or money market instruments, that can be invested when more attractive investment opportunities arise.

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Applicable to European Investors: Where this material is distributed to existing investors and pre 1 January 2021 prospect relationships based in mainland Europe, it is done so by Guggenheim Investment Advisers (Europe) Ltd., a U.K. Company authorized and regulated by the Financial Conduct Authority (FRN 499798) and is directed only at persons who are professional clients or eligible counterparties for the purposes of the FCA’s Conduct of Business Sourcebook.

Applicable to Middle East investors: Contents of this report prepared by Guggenheim Partners Investment Management, LLC, a registered entity in their respective jurisdiction, and affiliate of Guggenheim Partners Middle East Limited, the Authorized Firm regulated by the Dubai Financial Services Authority. This report is intended for qualified investor use only as defined in the DFSA Conduct of Business Module.

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