Perspectives Blog

Rebalancing the U.S. economy

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

…re already in the pipeline and some are just starting to gain modest traction. All involve some rebalance in the economy toward normalization. The first is policy normalization—both fiscal and monetary. The economy has been weighed down to varying degrees by a huge fiscal drag from earlier year tax hikes that hit households and from spending cuts by federal and state governments. While painful, these cuts have rebalanced budget deficits. A year a…

India’s new government fires investor enthusiasm

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

…As the new government puts its stamp on policy, it will create investment opportunities not only in the domestic economy but also in sectors exposed to government-led reform. We believe the new government could enact much needed reforms to stimulate investment and unlock India’s economic potential. India’s economy has been weighed down in recent years by both political and economic problems, which have dragged growth substantially below its pote…

Interest rates in a highly indebted economy

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

…: Sustainable DSR achieved with low rates and/or low debt stock If we assume there is an equilibrium DSR in the economy—above which point higher borrowing costs create unsustainable financial burdens—then the effective interest rate in the economy will be capped at the level r1. However, if the private sector reduces the stock of debt relative to income, then the same DSR could be consistent with a higher interest rate, r2. Thus, the need to kee…

Interest rates — Farewell, liquidity trap

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

…this outcome at current yield levels. Investors should brace for a year of challenging returns. Better domestic economy but lower rates At this time last year we argued that the U.S. economy would continue to recover in 2014, and that gradually rising rates would prove a headwind to high-quality ­ fixed-income returns*.  We now know that the former view was correct, but the latter was not. Exhibit 1 shows changes in survey expectations for gross…

October — It always seems to happen in October!

Ted Truscott, CEO, Global Asset Management | October 20, 2014

Markets are now asking what happens if growth slows again in the U.S. and/or weak and slowing growth in Europe, Russia and China drags down U.S. and U.K. growth? The stock market downturn is a reaction to changes in growth expectations and the volatility of that growth. Market assumptions for steady growth did not necessarily account for all the other risks. While we continue to see equities as an important pillar of longer term allocation stra…

Asset allocation: Q4 equity strategy

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

…y overweight 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…

QE worked, but not as advertised

Zach Pandl, Portfolio Manager and Strategist | November 3, 2014

…ard guidance and reduces uncertainty about short-term rates, which in turn lowers bond yields and stimulates the economy. Third, QE reduced perceived tail risks. The unsung aspect of QE was its role in reducing perceptions about tail risks for the economy. When short-term interest rates are at zero, negative economic news can have an outsized effect because it feeds a perception that the economy will get stuck in a low growth and/or deflationary…