Optimism and Risk Taking, For Now, Offering us
an Opportunity to Extend Maturities
Date: 11/6/24
Author: Dimitri Triantafyllides, CFA
The immediate reaction to Donald Trump’s win over Kamala Harris in the US presidential
election has been one of risk-taking euphoria, pushing up equities more than 2% to record
levels, increase in long-term US Treasury yields, and a rally in the US dollar. As can be seen
by the chart below, the US 10-year Treasury is now trading at a 3-month high, close to a
4.5% yield. While concerns about the US Deficit, inflation expectations, interest rate
burdens on the Federal budget as well as geopolitical risks remain, they are clearly to be
dealt with another day. For now, it’s risk on.
Since our objective is to manage portfolios for long-term risk-adjusted return, we are not
looking to chase performance over the immediate term. Instead, we see the selloff in
longer-term rates as an opportunity to start adding some five-to-10-year maturities in our
portfolios, taking advantage in the selloff in Treasurys.
The current shift of the yield curve toward “normalization” (ie short-term rates lower than
long-term rates) implies an improving environment for capital spending and economic
growth. This yield curve shift has generally helped increase the value of our holdings with
shorter maturities. Nonetheless, putting new capital to work at the short end of the curve
has become less appealing. The selloff in longer term rates discussed above is now offering
us an opportunity to seek yield in the 5-10-year maturity spectrum. We would not be
surprised to see the increase in long term yields continue, with the 10-year yield potentially
testing it’s prior recent peak of around 4.7%. As a result, we intend to be deploying capital
methodically and prudently.
Please feel free to reach out to us with any questions or comments.
Dimitri Triantafyllides, CFA
Chief Investment Officer
dtriatafyllides@forestcapital.net
Dana Coulter
Chief Administrative Officer
dcoulter@forestcapital.net
Karen Wright
kwright@forestcapital.net
704-533-9876 (office)
www.forestcapital.net
This report is for your information only and is not an offer to sell or a recommendation to buy
the securities or instruments named or described in this report. Additional information is
available upon request. The information in this report has been obtained or derived from
sources believed by Forest Capital Operating Company, LLC (Forest Capital) to be reliable, but
Forest Capital does not represent that this information is accurate or complete. Any opinions
or estimates contained in this report are current as of the date of the report and are subject to
change without notice.