Share prices and returns will fluctuate, which may result in a gain or loss when shares are sold. The Portfolio's holdings will change over time. In contrast to the equities markets, the high yield markets began the year on a positive note. With spreads to treasuries at their widest levels in almost a decade, opportunities were too attractive for investors to ignore as the period began. The Federal Reserve's rate cuts in January provided the catalyst for many to move into the market.
Money flows to the sector surged and issuance increased.
All boats, however, did not rise with the tide. Given the environment, sentiment favored quality. There was very little middle ground. Strength in the higher quality issues continued well into February. At that point, a string of earnings disappointments, the rising default rate and weakness in key economic data caused spreads to begin widening again.