Perspectives Blog

Rebalancing the U.S. economy

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

Both fiscal and monetary policy will begin to normalize in 2014 The economy’s performance will be an important metric for markets as growth needs to catch up The key to getting growth beyond 2% is for business to borrow to improve/expand productive capital It’s happening again—a fourth quarter bounce in economic activity that extends into the first quarter and supports the view that growth really, finally, has started to accelerate. Such bounc…

India’s new government fires investor enthusiasm

Natasha Ebtehadj, Fund Manager, Threadneedle International Limited | September 8, 2014

…l improve as economic activity accelerates and the new government puts incentives in place to encourage lending. 2. Consumption recovery: We are also targeting companies that should benefit from a recovery in consumer spending, particularly in urban areas where high inflation and a weak economy have dampened real wage growth. The penetration rate of vehicles is low in India, even relative to other Asian countries at 20 per 1,000 people. As consum…

Interest rates in a highly indebted economy

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

…tock of debt when the Fed eases. But what about during the exit process? Many observers have argued that today’s economy has a kind 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…

Income inequality, disinflation and profit growth – the role of globalization

March 10, 2014

…gly, despite levels of inequality rising within individual states, the rapid economic growth seen at the overall economy level for EM has seen global inequality — measured at the household level — first plateau and then decline at the margin over the past 30 years (at admittedly extremely high levels). Exhibit 1: Real income growth at various percentiles of global household income distribution, 1988-2008 (in 2005 PPPs) Source: Lakner & Milan…

Interest rates — Farewell, liquidity trap

Zach Pandl, Portfolio Manager and Strategist | December 15, 2014

…to pre-taper levels Time to take profit The outlook for rates naturally hinges on these fundamentals — the U.S. economy, the global economy and perceptions about the secular outlook — as well as current market valuations. In our view, the solid returns investors experienced in 2014 are highly unlikely to be repeated, making the present a good time to take profit on long-duration ­fixed income. First, valuations are currently poor. Our measure of…

2015 Outlook — Same song, slightly different arrangement

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | December 15, 2014

…the best chance of any meaningful investment gains. Just like last year and the year before. What’s different in 2015? As stationary as market conditions have felt lately, circumstances are always evolving. For 2015, while the essential elements of our outlook remain in place, we highlight two important changes in the market environment: The relative value of global equities vs. global bonds actually improved during 2014. Monetary policy around…

Slow growth: Why is it here and will it stay?

February 24, 2014

…nd aggravate these trends and need to be delicately balanced from a risk/reward perspective. We will then take a global perspective, examining the effects of globalization on domestic inflation and on U.S. and global industries and earnings. Following this we will analyze the impact of demographics and technological change on the U.S. economy, as well as the consequences of deregulation and reregulation. These are tectonic issues with meaningful…