Perspectives Blog

From tactical to core – The case for emerging market debt

Columbia Management, Investment Team | June 2, 2014

…r yield, particularly when accompanied by low volatility. Given the meager return on cash, investors have been moving into credit in search of additional returns and into asset classes with perceived levels of low volatility. Corporate credit spreads have tightened steadily, in part due to this demand, resulting in a steady return profile for the asset class. The stresses in the corporate credit markets that were readily apparent during and immed…

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…

Global market mid-year outlook

Mark Burgess, Chief Investment Officer, Threadneedle Investments | June 16, 2014

Overall macroeconomic picture in U.S. should push bond yields higher, particularly if the Fed stops its QE program later this year. We remain positive on emerging market debt while maintaining a bias against emerging market equities. Overall equity markets have been strong and current index levels suggest that investors still have confidence in the outlook for profits. Global equities and global bonds made progress in May with the former outpa…

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…

Finding opportunity in Chinese reforms

Robert McConnaughey, Director of Global Research | June 16, 2014

We continue to be excited about the opportunities to position in emerging markets ahead of positive change where market uncertainty still exists. Chinese corporate level governance reforms may be fertile ground for undiscovered investment opportunities. The scope and pace of China’s reform will have significant influence on the global economy and should be monitored closely. I spent last week in China, meeting with corporate management teams,…

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…