Perspectives Blog

Inflation consternation

Martin Harvey, Fund Manager, Threadneedle International Ltd | November 5, 2013

An inflation slowdown in the Eurozone has prompted calls for central bank action, as reduced liquidity coupled with euro strength threatens the recovery. The expectation of imminent easing by the ECB should assert downside pressure on yields, and lead Bunds to outperform other markets. It is uncertain whether the ECB will act this week; we think any intervention is likely to be verbal, at least at first. October inflation in the eurozone slowe…

The Fed’s decision tree

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

The outlook for quantitative easing remains difficult to gauge. We see decent odds that tapering begins in the not-too-distant future—primarily because we expect firm growth. If Fed officials were to revise their views on the costs and/or efficacy of QE, they may attempt to lean harder on the forward guidance tool. Last week the debate about quantitative easing (QE) was quickly overshadowed by the fiscal circus in Washington. The economic impa…

Fixed income outlook: From liquidity to growth

Gene Tannuzzo, CFA, Senior Portfolio Manager | July 10, 2013

…on the fundamentals of a slowly improving global growth story. Global bond markets have been under siege for much of the past two months. Looking back to April, the bond market, in our assessment, was expecting “quantitative easing (QE) forever.” Bernanke reminded us after the June FOMC meeting that we may only have “QE for now.” Since those comments, markets have been marking QE to market by pushing yields and risk premiums more broadly higher….

Is Japan’s economic rebound for real?

Daisuke Nomoto, Senior Portfolio Manager | May 23, 2013

Bold monetary easing in Japan has resulted in a shift in sentiment that the Japanese economy will finally come out of the long, dark tunnel. Our research suggests that there may be a modest boost to real income in coming months, which is expected to translate into increased consumer spending. We wouldn’t be surprised if the Japanese equity market takes a breather in the near-term, but this would create a good entry for people who have missed th…

Does Japan’s sell-off present buying opportunities?

Daisuke Nomoto, Senior Portfolio Manager | February 10, 2014

What’s behind the Japanese stock market’s recent correction? What’s ahead for Japan’s stock market, currency and government policy? Why the risk/reward tradeoff looks attractive at current price levels Abenomics has already had a bigger impact on the Japanese economy and financial assets than the failed attempt at quantitative easing between 2001 and 2006 (see chart). Inflation has moved back into positive territory, and household income is ri…

Could tapering be good for stocks?

Fred Copper, Senior Portfolio Manager | December 16, 2013

Despite all the discussion surrounding quantitative easing (QE), there has been little theoretical justification for the link between QE and equity prices. Europe provides a glaring counter-example of the impact of central bank policy on financial markets. Once the psychic umbilical cord of QE is cut (tapered), the market may actually be cheered by the end of what has always been perceived as a temporary and extreme form of life support. Few i…

The U.S. economy — a gain in GDP?

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | May 2, 2013

First quarter advance estimate of GDP shows annualized growth of 2.5%, which was below expectations. Positive contributions from personal consumption, fixed investment and inventories were shaved by negative contributions from net exports and government expenditures. This quarter’s weaker economic data will temper views of the Fed backing away from quantitative easing (QE) sooner rather than later. Growth trends still appear range-bound near 1%…