Strategic Fixed Income Investing: An Insider's Perspective on Bond Markets, Analysis, and Portfolio Management

CHAPTER 9

The Economy and the Markets

Economics is a subject that does not greatly respect one's wishes.

—Nikita Khrushchev

There are numerous data points and economic indicators that investors and market participants follow. Some are relevant and others are not. As is always the case, the landscape becomes even more complicated when the fixed income market is involved in the equation. The complexity can be seen as unfortunate or fortunate, depending on how you view the markets and the world of investing. Globalization of the fixed income arena and economy over the past decades has added new twists and turns that investors need to navigate. As a result, it is easy to immerse yourself in data points that, at times, can become very overwhelming.

There are economists and strategists who probably follow almost every data point that the economy and markets throw at them. Chances are, it is vital for a short-term trader to track and analyze numerous data points. Long-term investors may follow another path. Economic data points have the ability to create short-term volatility, which leads to dislocations. Traders thrive on dislocations, which create money-making opportunities. This is a good time to emphasize again that as a portfolio manager, you should consider and plan each trade for the long haul. As I said in prior chapters, create your road map. This is one key difference between trading and investing.

When the approach taken is investing, it is my strategy to narrow the list of ...