When Greg Taylor saw the U.S. 10-year Treasury yield start to move up meaningfully in recent months, it was a trigger to become more aggressive in his asset mix shift. That meant focusing on sectors that benefit from higher interest rates.
The portfolio manager at Redwood Asset Management, a subsidiary of Purpose Investments, who has been running the Redwood Select Equity Fund (primarily at Aurion Capital Management) since 2006, believes the higher rate environment will provide a lift for cyclicals, with financials being the most obvious beneficiary.
Taylor, who also manages the Redwood Global Opportunities Fund, the Redwood High Income Fund, and the Marijuana Opportunities Fund, noted that despite the shock caused by the stock market’s recent plunge, the past few years have really been the anomaly.
“I think we’re moving back to an environment where there is going to be more volatility, more sector rotation, and higher rates will definitely change what works,” he said. “The market should not have a VIX under 10, it should be should be in the 15 to 20 range.”