Perspectives Blog

Is Europe heading for Japanese-style deflation?

Martin Harvey, Fund Manager, Threadneedle International Ltd | August 4, 2014

…at caused a steep drop in economic activity in the wake of the Lehman collapse, while the onset of the sovereign debt crisis later played a part. The scale of the initial drop in the Eurostoxx index was similar to that seen in Japan in the early 1990s (Exhibit 1). On the surface, it appears that the Europeans are adopting correct policies as the Eurostoxx index has surged over the past year, and broken above the levels reached prior to the debt c…

Interest rates in a highly indebted economy

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

…is no fixed cap on the level of interest rates. Any increase in interest rates must be consistent with tolerable debt service ratios, the existing stock of debt and private sector savings. It’s in this context where Fed officials’ delicate approach to the exit process looks most understandable. The deleveraging constraint Last week the Federal Reserve reported that U.S. households’ mortgage debt service ratio—the share of disposable income dedic…

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….

Comments on the effect on global markets from the Ukraine crisis

Mark Burgess, Chief Investment Officer, Threadneedle Investments | March 12, 2014

To date, the fallout from the Ukrainian crisis has been largely confined to the emerging market debt, emerging market equity and commodity markets. At current levels, emerging market local currency debt appears to offer value, although we expect both the hard and local currency markets to remain volatile in the short term. Emerging equities reflect concerns not only around Russia and Ukraine but also the weaker growth outlook in Brazil and China…

Quality milestone in the European recovery story

March 17, 2014

…ct (GDP) data shows accelerating momentum in the euro area, while a pick-up in business investment suggests that European corporates are reassessing the economic outlook. Purchasing Managers’ Index data for February also underlined the recovery in the European manufacturing sector. This latest bank lending data point, shown in Exhibit 1, indicated that things are finally starting to move in the real economy. Exhibit 1: European bank lending to th…

How bad is China’s credit crisis?

Weili Jasmine Huang, Senior Portfolio Manager | February 3, 2014

We look at the scope and impact of China’s credit crisis We believe the possibility of a financial meltdown is low We discuss how resolution of the crisis may unfold News of a trust product on the brink of default has deepened the concerns of increasing instability of China’s financial system. The risk of defaults on trust and wealth management products will likely continue to impact markets. We believe that the shadow banking issue will…

European equities – Should investors care about periphery vs. core anymore?

Dan Ison, Portfolio Manager | January 13, 2014

…ormance in the eurozone We expect nominal growth to be the key driver of an improving earnings picture in Europe European equities should show further good returns to investors in 2014 As we enter 2014 there are the usual questions, conversations and strategy pieces extolling the virtues of different regions and asset classes. 2013 saw a phoenix-like resurgence in interest for European equities with an interesting mix of winners and losers. The…