Perspectives Blog

2014 outlook for fixed income investors

Colin J. Lundgren, CFA, Head of U.S. Fixed Income | December 20, 2013

Our 2014 forecast for the U.S. economy is optimistic, with more and more of the headwinds that have been restraining growth starting to fade away. For fixed income investors, we see opportunities in corporate bonds, municipal bonds and some emerging markets. Although we expect further rises in interest rates in 2014, bonds continue to offer not only income for investors, but also an important source of portfolio diversification. Watch: 2014 ou…

Slack and inflation

Zach Pandl, Portfolio Manager and Strategist | July 21, 2014

…estors should remain cautious around U.S. interest rate risk despite a solid first half of 2014. Excerpted from Zach Pandl’s newest whitepaper Structural weakness in labor force participation means there is less slack in the labor market than commonly believed. Limited spare capacity in turn implies earlier rate hikes and more risk that inflation eventually overshoots the Federal Reserve’s target. In recent decades that target was “minimum unemp…

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

Many investors struggle to determine the appropriate amount of bond duration in an environment of rising interest rates. The right amount of duration has to be considered in a portfolio context, because the main value of duration exposure comes through diversification. Because of the negative correlation between duration and the returns of riskier assets, high-quality fixed income will still be a cornerstone of any disciplined portfolio. By Za…

Inflation — The usual suspects

Zach Pandl, Portfolio Manager and Strategist | August 11, 2014

Four factors figure empirically into how and why inflation moves: (1) commodity prices, (2) spare capacity, (3) changes in exchange rates, and (4) monetary policy. These same factors argue for a gradual recovery in U.S. inflation in the year ahead, which could be a headwind for high-quality fixed-income returns. In contrast to U.S. markets, in markets with prospects for a trend lower in inflation expectations (e.g. certain pockets of EM), falli…

Is a stock market correction coming?

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

…e 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 probability to recession in the United States next year. 2) Financial accident. Of course, you can never know for sure, but we believe this is not likely in the age of financial sector deleveraging, Dodd Frank, etc. In addition, we are not currently observing speculativ…

Special report – 2014 mid-year review and outlook

Columbia Management, Investment Team | June 16, 2014

…rst half of 2014 and share their insights into what may be ahead for the second half of the year. Interest rates Zach Pandl, Portfolio manager and strategist Review: Government bond yields declined in early 2014, both in the U.S. and in other developed market economies. This surprising change in course after increases in 2013 caught many investors off guard. In our view, declining interest rates reflect renewed pessimism about the global economic…

Dovish feathers showing through

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

Dovish comments by Fed officials lead us to believe that normalization in interest rates could take a more circuitous route. While the steady economic recovery makes higher yields inevitable, the path we take to get there is dependent on the Yellen Fed’s policy approach. We remain underweight duration, but are now less sure 3-5yr yields will lead the way over the near-term. Textbooks would have us believe that monetary policy is a hard science…