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Market Timers: Buy Stocks, High-Yield Bonds: Searching for Alpha for March 2016

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Last May, I wrote an article for Investment Advisor about a group of advisors that sidestepped the 2008 credit crisis, but participated in the epic bull run that started in 2009.  Many of these RIAs exited risk positions in the latter half of 2015. Now they are beginning to re-enter the markets. 

This group uses high-yield bond prices as a timing tool.  When the asset class is trading below its moving average (typically, 20- to 100-day lookbacks are used), these advisors are in cash. But thanks to some constructive action in the last few weeks, high-yield prices have started creeping above key resistance levels, resulting in “buy” signals for this tactical crowd. 

A number of timers have said that we are in the early first inning of a recovery, and the market will have to bounce a bit higher before they are all in. But things are improving, and many feel that this new round of easy money policies by the world’s central banks make owning corporate paper more compelling than low-yielding government obligations. 

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