Perspectives Blog

Rebalancing the U.S. economy

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

Both fiscal and monetary policy will begin to normalize in 2014 The economy’s performance will be an important metric for markets as growth needs to catch up The key to getting growth beyond 2% is for business to borrow to improve/expand productive capital It’s happening again—a fourth quarter bounce in economic activity that extends into the first quarter and supports the view that growth really, finally, has started to accelerate. Such bounc…

India’s new government fires investor enthusiasm

Natasha Ebtehadj, Fund Manager, Threadneedle International Limited | September 8, 2014

…l improve as economic activity accelerates and the new government puts incentives in place to encourage lending. 2. Consumption recovery: We are also targeting companies that should benefit from a recovery in consumer spending, particularly in urban areas where high inflation and a weak economy have dampened real wage growth. The penetration rate of vehicles is low in India, even relative to other Asian countries at 20 per 1,000 people. As consum…

Interest rates in a highly indebted economy

Zach Pandl, Portfolio Manager and Strategist | October 13, 2014

…tock of debt when the Fed eases. But what about during the exit process? Many observers have argued that today’s economy has a kind of “deleveraging constraint”—that interest rates are capped at low levels because the overly indebted private sector cannot bear higher borrowing costs. In this world, even 10-year Treasuries yielding 2.3% could be attractive because they still command a premium to cash rates pinned permanently near zero. There are a…

Signs point to an improving U.S. economy

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | December 9, 2013

Data shows economy is improving Job growth is continuing GDP is not as good as the report would make you think The first week in December was a data goldmine for anyone hoping for news that the economy maintained momentum through the early autumn government distortions. The payroll report continued to post moderate and steady payroll gains consistent with a sustained improvement in labor markets. The interruption from the government shutdown i…

October — It always seems to happen in October!

Ted Truscott, CEO, Global Asset Management | October 20, 2014

…els of political risk around the world (Russia, China, ISIS), concerns about growth in Europe, a slowing Chinese economy and Ebola. In short, the stock markets in Europe and the U.S. were priced for a steady recovery with little margin for error. A correction was likely, although timing changes in markets is never easy. According to an adage in the investment world, “Everyone is wrong at the turn.” Exhibit 2: U.S. stock market valuation Exhibit…

U.S. rates — View update

Zach Pandl, Portfolio Manager and Strategist | April 4, 2014

…sensus, our views have been more negative on three key duration fundamentals: 1. The amount of slack in the U.S. economy 2. The credibility of the Fed’s forward guidance (the “dots”) 3. The willingness of Fed officials to overshoot their inflation and financial stability “targets” Taking each of these issues in turn: Slack: Today’s employment report was most notable for favorable supply-side news: although employment showed solid gains, measures…

What investors should know about Fed forward guidance

Zach Pandl, Portfolio Manager and Strategist | March 24, 2014

The Fed’s communication for 2014 looks like the strongest type of forward guidance, one that clarifies the existing policy approach and backs up its statements. Current statements for 2015 and beyond are closer to the weakest type of forward guidance, which means they should be considered less credible. Look for the market’s heavy reliance on Summary of Economic Projections (SEP) forecasts to fade over time. Last week, at Janet Yellen’s first…