Perspectives Blog

When the QE tide recedes, focus on what is revealed

Robert McConnaughey, Director of Global Research | January 6, 2014

Monetary stimulus from central banks can no longer be counted on to lift asset prices For 2014 we see a market with lower cross-correlations and more divergent investment outcomes Finding alpha opportunities requires in-depth global research to take advantage of market inefficiencies While there is fierce debate on the ultimate effectiveness of monetary stimulus surging from the central banks, one cannot dispute the boost that it has given to…

Bond yields are too low somewhere

Zach Pandl, Portfolio Manager and Strategist | July 14, 2014

Long-maturity bond yields are determined at a global level. Abnormally low forward rates are not just a U.S. phenomenon: there’s been a similar shift in the relationship between rates and growth across developed markets. If global rates remain persistently low, financial conditions will eventually need to tighten in other ways to offset this unexpected stimulus. The big surprise in bond markets this year has been the low level of long-maturity…

What investors should know about Fed forward guidance

Zach Pandl, Portfolio Manager and Strategist | March 24, 2014

…to clarify its existing approach, and nothing more. In contrast, many academic economists argue that policymakers should use forward guidance to intentionally deviate from past behavior in order to provide additional monetary stimulus at the zero lower bound—i.e. to go “lower for longer.” In our view, forward guidance that clarifies an existing framework is more credible, because the central bank will be less likely to change its mind in the futu…

What to make of the rebound in emerging market equities

Dara White, Senior Portfolio Manager | April 14, 2014

…olls in India, Indonesia and Brazil have shown pro-reform candidates (or in Brazil’s case anyone but the incumbent) gaining steam and have acted as a catalyst for these markets. In China we have seen an announcement of a mini stimulus as well as some SOE reform (Sinopec’s announcing the sale of its marketing division). As for Russia, things have not escalated further for now but we remain very cognizant of tail risk in this market. While there ar…

U.S. rates – Forward guidance taxonomy

Zach Pandl, Portfolio Manager and Strategist | March 17, 2014

…nce is only meant to clarify its existing approach. In contrast, many academic economists argue that policymakers should use forward guidance to intentionally deviate from past behavior in order to provide additional monetary stimulus at the zero lower bound—i.e. to go “lower for longer.” In our view, forward guidance that clarifies an existing framework is more credible, because the central bank will be less likely to change its mind in the futu…

Could tapering be good for stocks?

Fred Copper, Senior Portfolio Manager | December 16, 2013

…uity and bond markets when the Fed finally does taper, which by some speculation will occur as early as this month. However, is it possible that this time could be different, that the Fed decision to slow the pace of monetary stimulus might be seen as a positive, or at least not the end of the world as we know it? There are a few reasons to believe that may be the case. First, despite all the discussion surrounding QE, there has been little theor…

Scarce growth – Can the tortoises continue to outpace the hares?

Robert McConnaughey, Director of Global Research | May 19, 2014

…ment in U.S. growth (evidenced more clearly by the employment data) and a continuation of enough growth in the rest of the developed world to maintain forward progress, but not so much that we lose the support of central bank stimulus. All in all, an environment that continues to support not a “rising tide lifts all boats” outlook, but a world in which organic growers and innovators can stand out and trade over time at reasonable premiums. “Crowd…