Weekly Client Letter – August 28, 2023

Higher rates are making bonds and other income-generating investments look pretty enticing. Some of these yields haven’t been this good in over a decade. It sounds like a win-win, right? Investors should be cheering about the boost in interest income.

But wait, there’s a plot twist. Rising interest rates aren’t just bringing more interest income – they’re also hiking up interest rate payments. We’ve seen this shake up everything from mortgage rates to credit card interest. In fact, the year-over-year increase in interest payments hasn’t been seen in 60 years.

Now, the math gets interesting. While interest income is getting a lift, it’s struggling to keep pace with the surge in interest payments.

So, where does that leave investors, especially retirees who depend on steady income? With treasuries and investment-grade bonds hovering around 5%, finding sufficient income is becoming a puzzle.

Here’s where the magic of diversification comes in. At Redwood, we’re all about blending different income sources. Our strategies cover everything from treasuries and investment-grade bonds to high-yield corporates and municipal bonds, and even private credit.

As the financial landscape evolves, flexibility is key. Rest assured, we’re here to help you navigate the twists and turns to reach your financial goals.


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