Perspectives Blog

The role of income inequality

March 3, 2014

The rise in income inequality was a root cause of the U.S. financial crisis and the slow post-recovery period. Mediocre income gains for middle income households have contributed to the slow recovery of U.S. consumption and economic growth. As pressure continues to build to address income inequality, we expect the government to lead on this issue and private sector to lag. By Marie Schofield, Chief Economist and Toby Nangle, Head of Multi asse…

Gimme credit

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | August 22, 2013

Economic data seem largely unchanged from past trends, despite uptick in retail sales. Consumers continued to pare their debt last quarter continuing a nearly five-year trend. Given consumer deleveraging, consumption remains tethered to income gains – and those gains remain sub-par. Last week’s economic data give a very mixed picture of the health of the consumer. While the market seemed to cheer the uptick in spending seen in retail sales rep…

Tokyo Olympics — another driver to get out of deflation?

Daisuke Nomoto, Senior Portfolio Manager | September 13, 2013

Tokyo has been chosen to host the 2020 Summer Olympics, with an estimated economic benefit of at least $30 billion. Hosting the Olympics could bring a wide range of implications to Japan on top of the mere economic impact, including strengthening Prime Minister Abe’s leadership. The next announcement to watch for in the near term is the Japanese government’s decision how quickly they will increase the consumption tax rate. Tokyo has been chose…

Income inequality, disinflation and profit growth – the role of globalization

March 10, 2014

…e a financially unstable and unsustainable dynamic that culminated in the global financial crisis. We postulated that the lack of willingness on the part of banks to recreate this unsustainable dynamic would deliver a drag to consumption growth in developed markets. This week we consider the degree to which income inequality is a global phenomenon. Many countries in emerging markets (EM) have high and rising levels of income inequality with atten…

Lifting the U.S. oil export ban – Who wins?

Jonathan Mogil, Portfolio Manager and Senior Analyst | March 24, 2014

…and Conservation Act of 1975, making it illegal to export U.S. oil without a license. At that time, the U.S. was producing 8.4 million barrels per day (mbpd) of oil, and importing 4.1mbpd, representing one-third of its total consumption. Over the next three decades, oil imports more than doubled, and by 2008, during the throes of the Great Recession, the U.S. was importing 66% of its total oil consumption. Since 2008, U.S. oil volumes have grown…

China’s reform announcement

Timothy Flanagan, Associate Portfolio Manager | November 21, 2013

…seems to have hit the major areas required to move the economy to a long‐term sustainable growth model: Financial system liberalization for more efficient resource allocation, eventually reducing financial repression to spur consumption growth, balancing the fiscal disparity between local governments and the central government, eventually floating the currency, more SOE privatization, and improving social safety nets (pensions, land rights, and…

What to make of the rebound in emerging market equities

Dara White, Senior Portfolio Manager | April 14, 2014

…eal pickup in exports and/or real reform momentum. For most EM countries, exports remain the most important factor in explaining long-term growth. Strong exports not only help export-oriented companies but also boost domestic consumption as exports trickle down through the economy. EM exports peaked in late 2010 and have stagnated at or below zero in recent quarters. The developed world (the core of the export consumer market) is recovering, but…