Perspectives Blog

Quality milestone in the European recovery story

March 17, 2014

…embark on further unconventional monetary tools to prop up inflation and eventually drive growth in Europe. The eurozone would function more smoothly if the large gap in competitiveness between Germany and other major eurozone economies closes. Thus, wages need to rise in Germany and fall in the rest of Europe and thankfully this is happening, albeit slowly. Cultural and political factors in Germany provide a brake on wage growth, while German i…

Asset allocation: Q4 equity strategy

Columbia Management Global Asset Allocation Team, | October 27, 2014

…ampened business sentiment in Europe, potentially disrupting economic activity. We maintain a neutral outlook on eurozone. Like the eurozone, the Japanese economy and central bank have been on a divergent path relative to the Fed. The Japanese economy slowed more than expected from the second quarter consumption tax hike and has yet to show any meaningful bounce. Japanese equities are up about 3% year-to-date in local currency terms but have perf…

Is Europe heading for Japanese-style deflation?

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

Although there are many differences that should ensure that the eurozone does not follow Japan‘s fate, policymakers will need to act forcefully if the risk of deflation intensifies. While the euro area appears to be on track to avert deflation in the short term, many euro countries are “one crisis away from deflation.” The European Central Bank (ECB) claims to be ahead of the game, but policy needs to be more pro-active. The following is an ex…

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

Dan Ison, Portfolio Manager | January 13, 2014

The more dramatic the economic reforms, the better the stock market performance 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…

Bond yields are too low somewhere

Zach Pandl, Portfolio Manager and Strategist | July 14, 2014

Long-maturity bond yields are determined at a global level. Abnormally low forward rates are not just a U.S. phenomenon: there’s been a similar shift in the relationship between rates and growth across developed markets. If global rates remain persistently low, financial conditions will eventually need to tighten in other ways to offset this unexpected stimulus. The big surprise in bond markets this year has been the low level of long-maturity…

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…

Inflation — The usual suspects

Zach Pandl, Portfolio Manager and Strategist | August 11, 2014

…ator inflation for the countries shown in the next chart). We think this slowing very likely reflects the second eurozone recession and the resulting increase in slack in labor and product markets. This point comes across most clearly when looking at the differences in inflation across countries. Exhibit 2 shows inflation in the GDP price index for 25 developed market economies plus the eurozone as of Q1 2014 (the latest available observation in…