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…

Signs point to an improving U.S. economy

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | December 9, 2013

Data shows economy is improving Job growth is continuing GDP is not as good as the report would make you think The first week in December was a data goldmine for anyone hoping for news that the economy maintained momentum through the early autumn government distortions. The payroll report continued to post moderate and steady payroll gains consistent with a sustained improvement in labor markets. The interruption from the government shutdown i…

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…

U.S. rates — View update

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

…the month-to-month details but the amount 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),…

What investors should know about Fed forward guidance

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

…ntaining a low trajectory for the federal funds rate, including following through on a commitment to support the economy by maintaining more-accommodative policy for longer.” (emphasis added) One could argue that the “headwinds” idea is a way to clarify the reaction function in light of the particular challenges in the post-crisis economy, rather than intentionally follow a different reaction function than in the past (see our earlier take on hea…