Perspectives Blog

The taxman cometh

James Dearborn, Head of Municipal Bonds | March 13, 2014

…kely to cause real pain to taxpayers as they deal with potentially much larger tax bills, even if their income remained stagnant year-over-year. The two major sources of the increased pain emanate from the increase in the top federal income tax bracket from 35.0% to 39.6% and from the new Net Investment Income Tax (NIIT) of 3.8% which was enacted as part of the Affordable Care Act. The NIIT is a particularly unpleasant and unexpected surprise giv…

What’s the outlook for muni bonds?

James Dearborn, Head of Municipal Bonds | June 19, 2014

…he positive performance was a result of an unexpectedly sharp decline in Treasury yields — likely the product of a combination of factors, including slower first quarter growth, ongoing albeit smaller Fed purchases, a reduced federal deficit requiring less borrowing and attractive relative valuations compared to other bond markets. Apart from the bond friendly decline in rates, municipals enjoyed a confluence of additional factors that helped the…

Labor market takes center stage

Zach Pandl, Portfolio Manager and Strategist | October 15, 2013

…Keynesian” mainstream. This is reflected in the types of models she relies on in her analysis as well as her qualitative descriptions of the Fed’s role and objectives. The following quote appeared in a 1995 interview with the Federal Reserve Bank of Minneapolis, shortly after Yellen joined the Board: “I would agree that the Fed probably cannot achieve permanent gains in the level of employment by living with higher inflation. But the Federal Rese…

Special report – 2014 mid-year review and outlook

Columbia Management, Investment Team | June 16, 2014

…surprising change in course after increases in 2013 caught many investors off guard. In our view, declining interest rates reflect renewed pessimism about the global economic recovery, as well as easy monetary policy from the Federal Reserve, European Central Bank and Bank of Japan. Outlook: The U.S. economy has made considerable progress in the five years since the recession ended. Inflation, unemployment and broader measures of labor utilizatio…

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

…pal/Treasury yield ratios indicate municipal bonds are cheaper vs. Treasuries on a relative basis. Municipal bonds are one of the remaining investments that allow investors to shelter their income from taxes. With the highest federal tax rate at 43.4%, plus state taxes, the savings provided by municipal bonds can be considerable. It is what you keep that is important. Sources: Thomson Municipal Market Data (MMD), Bloomberg BVAL, 09/30/13 **Assu…

The Fed’s decision tree

Zach Pandl, Portfolio Manager and Strategist | October 8, 2013

…Washington. The economic impact of the shutdown cannot be known for certain, but estimates from economists suggest a drag of about 0.25%-0.50% on annualized fourth quarter gross domestic product (GDP) for every two weeks the federal government remains closed. Needless to say, a debt ceiling crisis could have much more worrisome impacts on the economy if it leads to a missed payment on the government’s debt. If the standoff continues beyond this…

Rebalancing the U.S. economy

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

…d normalization. The first is policy normalization—both fiscal and monetary. The economy has been weighed down to varying degrees by a huge fiscal drag from earlier year tax hikes that hit households and from spending cuts by federal and state governments. While painful, these cuts have rebalanced budget deficits. A year ago, the U.S. budget deficit was 6.5% of gross domestic product (GDP). It will likely fall to less than 4% of GDP in last year’…