Perspectives Blog

Gaps, not growth

Zach Pandl, Portfolio Manager and Strategist | February 25, 2014

Monetary policy is primarily about “gaps” not growth: the Fed is trying to reduce spare capacity in the economy, not bring about a rapid expansion per se. Despite concerns over cyclical weakness in labor force participation, the unemployment rate is sending similar signals as most other output gap proxies. The output gap improved despite a relatively slow expansion, suggesting weak potential growth. While it’s far too soon to revise any medium…

Harvesting a New Moderation in Asia

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

…rformance does not guarantee future results. It is not possible to invest directly in an index. Being adapted As growth slows, companies positioned for the higher growth era in Asia found themselves carrying cost structures that could put them in danger of extinction. Capital expenditure plans had to be scaled down and ongoing expenses had to be cut. Li Ning, a sports apparel and equipment maker in China, is a company that has had to make painful…

U.S. rates — play for growth

Zach Pandl, Portfolio Manager and Strategist | December 10, 2013

More signs that U.S. growth is accelerating; with 7% unemployment rate, look for qualitative communication changes at next FOMC meeting. Higher odds of December taper but we still think January is more likely (with possible hint in December press conference). We wonder whether front-end rates can remain anchored as growth picks up. The November employment report brought more positive news on U.S. activity, with a healthy gain in nonfarm payrol…

A less certain world favors high-quality stocks

Philip Dicken, Head of European Equities, Threadneedle International Ltd | October 6, 2014

…erned about the outlook for cyclical European earnings. In addition to reducing our financials weightings in our large-cap funds, we have reinvested in the energy sector and increased our weightings in consumer staples. Given the more uncertain growth outlook, we are also invested in securities that should provide attractive absolute return potential. Overall, our core large-cap portfolios today are more balanced, reflecting the weaker growth out…

Quality milestone in the European recovery story

March 17, 2014

…close to their 2005 highs of 9.5% for constituents of the Euro Stoxx 600 Index*; last time round this presaged a capital expenditure and M&A boom in Europe. Exhibit 2: Eurozone non-residential capex as a share of GDP Source: JP Morgan Equity Strategy, December 2013 An increase in average net debt/EBITDA to 2x from the current 1.6x would provide €400 billion of firepower for growth. As with U.S. corporates, the short-term focus is likely to b…

Asset allocation: Q4 equity strategy

Columbia Management Global Asset Allocation Team, | October 27, 2014

…t as we published our September outlook. For now, though, we favor building that overweight primarily using U.S. large-cap stocks. We believe that although U.S. stocks appear fairly valued, they can rise with earnings growth. U.S. corporate fundamentals look solid and supportive of earnings growth, with the U.S. economy on a clearly divergent path relative to other developed economies (Exhibit 1). Domestic economic conditions continue to indicate…

Rebalancing the U.S. economy

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

…tary 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 bounces have disappointed s…