DECEMBER EDITION: Your Need-to-Know Monthly Commentary and Economic Outlook


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Stock Market and Economic Outlook:

We believe that the market is range bound at 4,500-4,700 through the end of the year, which implies a neutral and volatile market. We have upgraded our forecast for US GDP growth from 0-2% to 2-3% in 2022. We also see oil trading in the range of $65-$75 in December 2021 and $80-100 in 2022.

· The Omicron variant creates a great deal of near-term uncertainty as we do not know how severe it is and how resistant it will be to vaccines; however, some of this uncertainty is mitigated by the production and development of a class of drugs to be used for treatment, which should reduce deaths from the virus. Thus, we believe it is causing only a short-term disruption in international travel, which will subside in early 2022.

· Legislators have removed corporate tax rate increases and scaled back other taxes in recent proposed legislation. Corporate tax rates are 33% negatively correlated with growth globally.

 

Interest Rate and Inflation Outlook:

We believe 10-year interest rates will head higher as the Fed starts to taper and inflation continues to accelerate, but they do have a ceiling. We are forecasting that 10-year rates will be 2-2.25% in 2022. We still believe the Fed has lost control over inflation and forecast that true run-rate inflation is currently over 10%. Under this environment, we see value stocks performing better than high valuation tech stocks

· Ultra-loose Fed policy (monetary base up 82% since the beginning of the Pandemic) has driven housing prices up at a record rate of 20% y/y and rents are increasing at over 10% per year for the first time since the 1970s (where housing prices increased 10.7% annually during the decade and rents also increased over 10% per year).

· Tighter Fed policy in 2022 is likely to flatten the yield curve, which will keep a lid on long term rates. There are $52 trillion of global pension assets which will rebalance and reallocate into treasuries if yields are significantly above 2%, thus effectively capping the rise in interest rates.

 

Quick Tip:

When inflation rises, the dollar often rises as the market anticipates Fed tightening. Consider adding defensive dividend investments that have lower volatility and benefit from rising inflation to your portfolio.


 

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About Us:

Infrastructure Capital Advisors, LLC (ICA) is an SEC-registered investment advisor that manages exchange traded funds (ETFs) and a series of hedge funds. The firm was formed in 2012 and is based in New York City. ICA seeks current income opportunities as a primary objective in most, but not all, of ICA's investing activities.


DISCLOSURE Opinions represented above are subject to change and should not be considered investment advice. Past performance is not indicative of future results. The links to the fund fact sheets will provide standardized performance and risk disclosures.


DISCLOSURE The information contained herein represents our subjective belief and should not be construed as investment advice. The information and opinions provided should not be taken as specific advice on the merits of any investment decision. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. Infrastructure Capital Advisors, LLC nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. This article includes information based on data and calculations sourced from Bloomberg and other third-party data. We believe that the data is reliable, we have not sought, nor have we received, permission from any third-party to include their information in this article. Many of the statements in this article reflect our subjective belief.


FUND RISKS

PFFA Exchange Traded Funds (ETF): The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities. Preferred Stock: Preferred stocks may decline in price, fail to pay dividends, or be illiquid. Non-Diversified: The Fund is non-diversified and may be more susceptible to factors negatively impacting its holdings to the extent that each security represents a larger portion of the Fund’s assets. Short Sales: The Fund may engage in short sales, and may experience a loss if the price of a borrowed security increases before the date on which the Fund replaces the security. Leverage: When a Fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded. Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment. No Guarantee: There is no guarantee that the portfolio will meet its objective. Prospectus: For additional information on risks, please see the Fund’s prospectus. https://www.virtus.com/products/virtus-infracap-us-preferred-stock-etf#shareclass.742/period.quarterly


PFFR Exchange-Traded Funds (ETF): The value of an ETF may be more volatile than the underlying portfolio of securities it is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities. Preferred Stocks: Preferred stocks may decline in price, fail to pay dividends, or be illiquid. Real Estate Investments: The Fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management. Industry/Sector Concentration: A Fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated Fund. Passive Strategy/Index Risk: A passive investment strategy seeking to track the performance of the underlying index may result in the Fund holding securities regardless of market conditions or their current or projected performance. This could cause the Fund’s returns to be lower than if the Fund employed an active strategy. Correlation to Index: The performance of the Fund and its index may vary somewhat due to factors such as Fund flows, transaction costs, and timing differences associated with additions to and deletions from its index. Market Volatility: Securities in the Fund may go up or down in response to the prospects of individual companies and general economic conditions. Price changes may be short or long term. Prospectus: For additional information on risks, please see the Fund’s prospectus.

https://www.virtus.com/products/infracap-reit-preferred-etf#shareclass.621/period.quarterly


AMZA Exchange Traded Funds (ETF): The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities. MLP Interest Rates: As yield-based investments, MLPs carry interest rate risk and may underperform in rising interest rate environments. Additionally, when investors have heightened fears about the economy, the risk spread between MLPs and competing investment options can widen, which may have an adverse effect on the stock price of MLPs. Rising interest rates may increase the potential cost of MLPs financing projects or cost of operations, and may affect the demand for MLP investments, either of which may result in lower performance by or distributions from the Fund’s MLP investments. Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund. Short Sales: The Fund may engage in short sales, and may experience a loss if the price of a borrowed security increases before the date on which the Fund replaces the security. Leverage: When a Fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded. Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment. MLPs: Investments in Master Limited Partnerships may be adversely impacted by tax law changes, regulation, or factors affecting underlying assets. No Guarantee: There is no guarantee that the portfolio will meet its objective.

https://www.virtus.com/products/infracap-mlp-etf#shareclass.618/period.quarterly


Contact VP Distributors LLC at 1-888-383-4184 or visit www.virtusetfs.com to obtain a prospectus which contains this and other information about the Fund. The prospectus should be read carefully before investing.

Virtus ETF Advisers, LLC serves as the investment advisor and Infrastructure Capital Advisors, LLC serves as the subadviser to the Fund. The Fund is distributed by VP Distributors, LLC, member FINRA and subsidiary of Virtus Investment Partners, Inc

Past performance is not indicative of future results. The links to the fund fact sheets will provide standardized performance and risk disclosures.


© 2021 Infrastructure Capital Advisors, LLC

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