Perspectives Blog

Half-time report on the U.S. consumer

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | July 28, 2014

U.S. consumers have taken a more cautious attitude toward debt and been more selective about using it for discretionary purchases. With consumers using credit cards less and using debit cards much more, the supports for higher discretionary spending are keyed off income and wages and also employment. With low debt use and income growth holding back consumption and demand, households will require stronger job growth and real wage gains to accele…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

One way investors may boost yields without taking on undue credit risk is through U.S. government agency debt. While many investors associate U.S. agency debt with very low yields, other types of agency debt can offer significant spreads to Treasuries with a modest decline in liquidity. We have been increasing our allocation to the agency market in core portfolios as a way to reduce credit risk while maintaining competitive yields. By Carl W….

Trouble in paradise: Q&A about Puerto Rico bonds

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | January 2, 2014

Why has Puerto Rico become such an issue now? Should investors be concerned with a downgrade or default? Is Puerto Rico a systemic risk for the municipal market? Historically, Puerto Rico (PR) bonds’ high yield and triple tax exemption (federal, state and local) had been a big lure for many institutional investors, such as mutual funds. PR debt exposure in municipal bond funds, namely single-state municipal bond funds, proved advantageous for sh…

Hanging in

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | September 20, 2013

Recent retail sales data are well below expectations and probably an indication that consumers have become more cautious about spending. Financial conditions matter greatly, and the recent tightening is likely having some impact on housing activity and consumer attitudes. Spending follows wages and it will be difficult for retail spending to gain much traction with the tie to shallow compensation trends. The best one can say about consumer spe…

From tactical to core – The case for emerging market debt

Columbia Management, Investment Team | June 2, 2014

For many investors, emerging market debt could be viewed as a core-portfolio holding rather than a short-term tactical investment. 2013’s re-pricing created value in terms of higher yields, a more dedicated investor base and a better relative value argument. Flexibility across the full spectrum of EMD investment opportunities is extremely important, as emerging markets are not homogenous. By Patrick McConnell, Director, Fixed Income Product Ma…

Missing links and multipliers

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | June 9, 2014

Several forces are colliding now and causing a downshift in the trajectory of the U.S. housing recovery. Household formations remain at multi-year lows due in large part to mediocre income and job gains in combination with high student loan debt by 25 – 45 year old homebuyers. Fewer homeowners mean missing multipliers for growth. As a result, housing will prove less of an accelerator for economic growth in the period ahead. Having witnessed a…

Apparel retail doldrums

Mari Shor, Senior Equity Analyst | August 11, 2014

and housing markets. With household net worth up 35% since the 2009 trough, consumer confidence has risen close to its long-term average, and consumers have indicated increased willingness to reduce their savings and take on debt. Through the Q2 earnings season, several large bank CEOs commented that their consumer credit businesses had recently accelerated, as lending standards have eased and consumers have taken advantage of the still-historic…