I was gathering ideas this weekend for 2016 investment themes that didn’t carry huge amounts of risk or volatility but offered some decent reward potential. The high yield corporate bond (junk bonds) market chart looks to be rolling over. While I’m not ready to predict the US bond market bull is ending, I think a good case can be made for junk bonds having their best days behind them. SJB looks like a good way to play this and it certainly isn’t a trading vehicle with a low daily volume. But with a 1-yr+ investment horizon, I think you could see 15% gains possibly in 2016. The ETF carries a 95 basis point fee if held for a year but the upside still looks good and the downside looks fairly benign.

HYG

SJB

A falling corporate bond market could spell trouble for the broader markets as many M&A deals are funded with the issuance of corporate debt. We have already seen this year the issuance of corporate debt fall dramatically compared to prior years. The Fed increasing rates in 2016 isn’t going to help those markets either as it becomes even more expensive to repay the loans.