The Federal Reserve is sounding increasingly hawkish heading into its final gathering of the year in December. Gary Cloud, fixed income portfolio manager for the Hennessy Equity and Income Fund (HEIIX), said he is not overly concerned about the impact on his bond holdings. ‘We are neutral duration but we do look for the yield curve to flatten, so we are not afraid of the Fed rate hikes,’ said Cloud. The Hennessy Equity and Income Fund is down 80 basis points so far this year, according to fund-tracker Morningstar. The fund sports a trailing twelve month yield of 1.2%. Cloud, a subadvisor to the fund through FCI, manages the fixed income portion of the portfolio, which is roughly 40% of the assets. The remaining 60% is invested in equity and managed by the London Company. The strong dollar was a problem for multi-nationals in the third quarter, many of which missed Wall Street expectations due to the currency exchange. This will only get worse should the Fed hike rates, but Cloud once again is confident it will not overly impact the credit market. ‘There is no doubt that revenues and earnings have been impacted by that. It’s tough to keep the margins up on the balance and that could make it more difficult for credit,’ said Cloud. ‘We think that it’s manageable.’
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