Navigating 2025: 3 Key insights on preferred securities 

Navigating 2025: 3 Key insights on preferred securities 

 

Allie Quine, CFA

Portfolio Specialist

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2 minute read

February 2025

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After a strong 2024 for preferreds, we are watching the impact of the election, the interest rate environment and sector performance in 2025.

KEY TAKEAWAYS

  • Preferred securities generated a healthy total return in 2024, outperforming most fixed income categories, including high-yield bonds.
  • Looking ahead, the economic impact of the U.S. election and the interest rate environment are two key developments we are watching in the preferred securities market.
  • Diversification and sector performance will also be important to watch this year across sectors like insurance, financials and utilities to help navigate potential economic slowdowns.

Hello everyone, I’m Allie Quine.

In 2024, the preferred market delivered a total return of 9.1%.

Despite an evolving growth and interest rate backdrop, preferred securities generated a healthy total return.

Economic growth in the U.S. exceeded expectations, while Europe avoided contraction.

Inflation measures generally stabilized, leading central banks to reduce overnight lending rates.

Preferred securities outperformed U.S. Treasuries, investment-grade corporate bonds, and high-yield bonds.

The technical backdrop was also positive, with limited net new supply and strong performance from contingent capital securities.

As we look ahead to 2025, here are three key things we’re watching:

  1. Economic Impacts of the U.S. Election: Trade, immigration, and fiscal policies may have inflationary impulses, potentially affecting interest rates and economic growth.
  2. The Interest Rate Environment: Elevated interest rates could pose downside risks to the economy, but strong credit fundamentals and a resilient consumer base may mitigate these risks.
  3. Diversification and Sector Performance: We believe in the importance of diversifying preferred holdings across sectors like insurance, utilities, and telecoms to navigate potential economic slowdowns.

Thank you for your time. We remain committed to delivering strong performance and navigating the challenges and opportunities that lie ahead in 2025.

ABOUT THE AUTHORS
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Allie Quine, CFA CFA, Vice President, is a member of Cohen & Steers’ Portfolio Specialist Group.

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