Perspectives Blog

The coming divide in state credit quality

Ty Schoback, Senior Municipal Analyst | June 3, 2014

…ely compensated for investing in states of varied creditworthiness. State tax revenues typically exhibit greater economic sensitivity than local governments due to greater reliance on income taxes. Since the end of the Great Recession, states have seen above average annual tax revenue growth, largely driven by robust equity market gains that have generated strong capital gains taxes. A number of states have managed such growth with exceptional p…

Steady as she goes

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | April 7, 2014

…ntinues to be a drag with cuts at both federal and state & local government. One threshold worth mentioning was that the overall private level of employment finally exceeded the pre-recession high—nearly 5 years after the recession ended. The Household Survey had the unemployment rate holding steady at 6.7%. We may see a slower reduction in coming months as more people enter the labor force. The labor force rose 503K, but employment levels r…

The role of income inequality

March 3, 2014

…nt studies of the post-financial crisis period have found an even higher income share grab for the top 1% in the income distribution. Exhibit 1: Income share of the top 5% Source: Cynamon & Fazzari, Inequality, the Great Recession and Slow Recovery, November 2013 This phenomenon largely fell under the radar in the last three decades, however, as spending inequality was less pronounced and consumption trends were less affected. This dichotomy…

Is a stock market correction coming?

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | December 16, 2013

…2 out of 5) most bullish mode. In addition, other analysis focused on the business cycle indicates ongoing expansion of the U.S. economy, which also argues for ongoing equity market strength. What might bring a correction? 1) Recession. Interestingly, in the absence of recession, the stock market tends to perform fairly well. Neither Marie Schofield (our chief economist) nor Zach Pandl (our chief interest rate strategist) assigns a material proba…

U.S. rates — View update

Zach Pandl, Portfolio Manager and Strategist | April 4, 2014

…of labor market slack in general. Few serious observers think the U.S. economy is running at full capacity—the unemployment rate is still 6.7% after all. The disconnect is that slack in the economy looks on par with a typical recession, but monetary policy is calibrated for something much worse. At this point we do not see that much ambiguity in the data around this issue (see some of our research here), so our views have not changed after today’…

The perils and pitfalls of buying individual municipal bonds

James Dearborn, Head of Municipal Bonds | February 27, 2014

…nsured bonds, analysts at rating agencies are now required to follow a larger numbers of issuers. This increased workload comes at a time when many state and local governments are still addressing the lingering effects of the recession as well the ramifications of depleted pension funding. These factors have been exacerbated by the ratings recalibration, a large scale rating adjustment that resulted in sweeping credit upgrades. In 2010, Moody’s a…

An improving outlook for European equities

Philip Dicken, Head of European Equities, Threadneedle International Ltd | October 18, 2013

Economic data confirm that the Eurozone has exited recession. There are signs that corporate transactional activity is increasing as businesses become more financially secure. While Europe remains beset by challenges, the economic background is improving, valuations are looking more attractive and investors who have not been paying attention to European stocks may want to take a closer look. According to Eurostat, the 17 eurozone member states…