Perspectives Blog

Interest rates in a highly indebted economy

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

…nd 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 few ways in which the deleveraging constraint might work. The first is through the impact of rising rates on the private sector

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…

From tactical to core – The case for emerging market debt

Columbia Management, Investment Team | June 2, 2014

…nvestors had been increasing their EMD holdings, recognizing their fairly low allocations to EMD relative to the sector’s capitalization and economic importance. However, investor confidence in the sector and its attractive risk-return proposition was unexpectedly tested last year. Yields on EMD and corporate credit, which historically have traded in tandem, moved in opposite directions (Exhibit 2). Spreads on EM countries rated below-investment…

Profit margin watch

Tom West, Director of Equity Research | October 13, 2014

…new products or buy smaller, upstart competitors that are positioned for these trends. Regulatory fiat: Both the financial sector and the healthcare sector saw disruption in the form of legislation around pricing and offerings. Healthcare has absorbed much of the Affordable Care Act pretty well. Managed care companies have held onto profitability, and some of the providers are benefiting from the growth in utilization. The financial sector was hi…

Rebalancing the U.S. economy

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

…tant as the effects seem to have pushed up markets more than the economic growth. Many ratios relating stock and financial assets to GDP appear extended on a historical basis. For instance, looking at data from the Federal Reserve’s (the Fed) quarterly Flow of Funds report, the total worth of financial assets owned by households is at its highest ratio ever compared to GDP (see chart 1). Most of the gains in financial assets have been from equiti…

Harvesting a New Moderation in Asia

Soo Nam Ng, Head of Asian Equities | June 23, 2014

…conomic crisis, we have been able to rise above the challenges. Most notable in my own memory are the 1998 Asian Financial Crisis and the Global Financial Crisis a decade later. Post-crisis market recoveries have not been just about normalization of stock valuations and reversion to pre-crisis conditions. Instead, market indices have been able to scale new highs (Exhibit 1), implying that companies ultimately emerge stronger as a fresh adaptive e…

Biotech’s beneficiaries: How outsourcing is improving the sector and spreading the wealth

Aaron Reames, Senior Equity Analyst | February 24, 2014

…quarters. Outsourcing offers biotech firms varied advantages, from cost reduction to enhancing credibility. The sector’s success and the outsourcing trend is fueling ancillary businesses, notably specialty REITs, CROs and research tools companies. As biotech indices continue to surpass all-time highs, one must contemplate if there is additional room to run. We continue to believe the sector will outperform the broader markets for at least a few…