Perspectives Blog

Finding the sweet spots in corporate spending

Robert McConnaughey, Director of Global Research | February 24, 2014

…limits. Businesses that fail to keep pace with change, risk market share loss and revenue declines. Conversely, with borrowing costs low and many businesses still dragging their feet on reinvestment, hoping to squeeze higher profits out of an aging asset base (see Exhibit 2), the time may be ripe for wise tactical investment in innovation in order to steal a march on the competition. Exhibit 2 Source: Goldman Sachs Investment Research, February…

Triangulating on 2014 corporate earnings

Tom West, Director of Equity Research | January 27, 2014

Estimating corporate earnings with bottom-up forecasts, top down forecasts and empirical forecasts will result in a range of outcomes While we believe bottom-up forecasts provide the best estimate, the other two methods can be useful in testing the result We look at top down build-up earnings growth for the S&P 500 and growth expectations by sector to arrive at an EPS growth estimate for 2014 I generally think the best way to build up an e…

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

…view. In the depths of the financial crisis, the credit spigot was all but shut off for U.S. corporations. Since then, the market has meaningfully healed, and issuance today is robust with more than $1 trillion of high-yield corporate securities issued in the U.S. last year (see Exhibit 1). While we expect corporate health to remain stable and default rates low over the next year, we are definitely seeing a shift in corporate behavior in favor o…

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

March 10, 2014

…sical infrastructures are by no means homogenous across the world. Put simply, there is a good reason why Silicon Valley has not shut up shop and relocated to the Democratic Republic of Congo despite its much lower wages. The profits of this process go to both owners of global businesses and to workers employed in EM, with margins at the former boosted by the lower relative unit cost of the latter. So, for example, Apple reaps the majority of the…

How will the Volcker rule impact capital markets?

Richard Manuel, CFA, Senior Analyst | January 6, 2014

…e. There has been considerable debate as to the role proprietary (“prop”) trading played in the crisis. In response, the Government Accounting Office (GAO) did a study to scale the degree to which the largest five U.S. banks’ profits relied on prop trading. Notes: Data shown here on stand-alone proprietary trading—which is conducted at desks that are organized by a banking entity with the specific purpose of trading a firm’s own capital—does not…

The importance of taking a long-term perspective

Jeffrey Knight, CFA, Head of Global Asset Allocation | February 3, 2014

…ity from more significant fundamental changes that could alter our longer term assessments. So far, market volatility in 2014 has not changed our outlook for the major drivers of our strategic forecasts, like economic growth, corporate earnings, interest rate policy or inflation. As always, we continue to closely monitor global markets and adjust our investment strategy accordingly. Disclosure The Barclays U.S. Aggregate Bond Index is a market va…

When do floating rate loans begin to float?

Columbia Management, Investment Team | July 11, 2013

…in more volatile prices and more risk to principal and income than investment grade loans or securities. The Barclays U.S. Aggregate Bond Index is a benchmark index composed of U.S. securities in Treasury, government-related, corporate and securitized sectors. It includes securities that are of investment-grade quality or better, have at least one year to maturity and have an outstanding par value of at least $250 million. The Barclays U.S. Mortg…