Fed officials have highlighted underemployment but offered little guidance about how this issue affects the policy outlook. Traditional tools like the Taylor Rule need to be recalibrated if the central bank focuses on a different measure of slack, so they offer little guidance to investors at the moment. We hope to learn more at this
Since 2011, consumer spending has been below average overall, and spending on retail apparel has been especially poor. A host of factors, from shifting consumer priorities to poor inventory control have forced apparel retailers to compete on price, and sales and profitability have suffered dramatically. Premier global brands with differentiated product and strong, flexible supply
U.S. consumers have taken a more cautious attitude toward debt and been more selective about using it for discretionary purchases. With consumers using credit cards less and using debit cards much more, the supports for higher discretionary spending are keyed off income and wages and also employment. With low debt use and income growth holding
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.
Evidence of data dependency at the June FOMC meeting suggests policy will respond to unemployment and inflation surprises. We are more confident the Fed’s reaction function is (nearly) done moving. We therefore remain cautious about exposure to U.S. interest rate risk, especially at the middle of the yield curve. The June FOMC meeting contained a
Key investment professionals review the first 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
Overall macroeconomic picture in U.S. should push bond yields higher, particularly if the Fed stops its QE program later this year. We remain positive on emerging market debt while maintaining a bias against emerging market equities. Overall equity markets have been strong and current index levels suggest that investors still have confidence in the outlook