Perspectives Blog

QE worked, but not as advertised

Zach Pandl, Portfolio Manager and Strategist | November 3, 2014

While QE proved very effective in reinforcing the Fed’s communication about short-term interest rates, there could be simpler ways to achieve the same outcome. The U.S. experience with QE suggests it would be effective in Europe. The Fed ended QE because it succeeded and that’s good news for investors. Last week the Federal Reserve announced the end of its bond-buying program, which has been running with only brief interruptions for the last s…

U.S. rates – Waiting for the sound

Zach Pandl, Portfolio Manager and Strategist | May 5, 2014

…2% year-over-year from 1.1% previously. With a trend-like gain for April (and no revisions to prior months), the Fed’s preferred measure of core inflation will increase to 1.4% when reported on May 30. It is these shrinking gaps that motivate our cautious views about duration risk. Importantly, we do not take issue with the fact that the Fed is still falling short of its inflation and unemployment mandates. Instead, the big question is whether po…

U.S. rates — When the facts change

Zach Pandl, Portfolio Manager and Strategist | September 10, 2014

…not that far from our own. Declining spare capacity has brought forward estimates of the first rate hike by the Fed. As of December, respondents in the Fed’s primary dealer survey saw a 44% probability that the first rate hike would come in 2016 or later. Today that number is just 22%. Similarly, in the latest survey, respondents saw a 37% chance of a hike before the Q3 2015, up from 26% in December. Thus, while there’s still some room for these…

Could tapering be good for stocks?

Fred Copper, Senior Portfolio Manager | December 16, 2013

…porary and extreme form of life support. Few issues currently cause as much investor angst as the timing of the Fed’s eventual reduction in the pace of quantitative easing, aka tapering. In May, when the Fed first spoke concretely about slowing the rate at which they are buying government and mortgage securities, interest rates around the world rose and stock markets fell, with the biggest pain being felt in those emerging markets most reliant o…

U.S. rates – An intriguing six point three

Zach Pandl, Portfolio Manager and Strategist | June 9, 2014

Fed and consensus unemployment forecasts are likely to come down after last week’s jobs report. It is not obvious what lower unemployment rate forecasts mean for U.S. monetary policy. June FOMC meeting should shed light on Fed’s worldview—in particular, whether the U3 unemployment rate still matters. The latest jobs report may look pretty bland on the surface, but I can assure you that it will generate plenty of intrigue among close observers…

U.S. rates – Headwinds

Zach Pandl, Portfolio Manager and Strategist | March 17, 2014

…way, monetary policy may not be exceptionally easy today (though we will take up that issue below). Rather, the Fed’s stance could be thought of as the mirror image of the constraints on growth from other sources: tax increases, underwater mortgages, impaired securitization markets, etc. To close the output gap, Fed policymakers need to offset these headwinds complicating their job. For economists the term “headwinds” is just a stand-in for a fa…