Third Quarter Report (Second of a Series)

For two weeks in a row we’ve been blessed with memorable quotes from top market observers. We wrote in our last column about Fed chair Powell’s comment that the current cycle could go on “indefinitely.”

This week’s nugget comes from our long-time friend, Steve Miller, the chief executive of Fulcrum Financial. “You can’t fight the Fed,” he said, “except, maybe with loans.”

Indeed, that’s the beauty of the floating rate asset class in a rising rate environment. Unlike equities – or fixed income, for that matter – that seem increasingly spooked as the Fed persists with its upticks, this climate is tailor-made for loans and their investors.

The combination of a healthy, but not too frothy, economy, and a moderate pace on hikes, has long been considered constructive for loans. High-yield bond funds, by contrast, saw almost $5 billion in outflows last week – the fourth highest exit ever.