Perspectives Blog

Puerto Rico’s double-downgrade

Michael Taylor, Senior Municipal Analyst | February 10, 2014

…e double-downgrade puts pressure on Puerto Rico to shore up its finances in the coming weeks A future default or debt restructuring could rattle investor confidence and impact all municipal market issuers On February 4, Standard & Poor’s lowered its long-term credit rating on the Commonwealth of Puerto Rico’s (PR) general obligation (GO) debt from ‘BBB-’ to ‘BB+,’ making it the first rating agency to downgrade the Commonwealth to below…

Is Europe heading for Japanese-style deflation?

Martin Harvey, Fund Manager, Threadneedle International Ltd | August 4, 2014

…at caused a steep drop in economic activity in the wake of the Lehman collapse, while the onset of the sovereign debt crisis later played a part. The scale of the initial drop in the Eurostoxx index was similar to that seen in Japan in the early 1990s (Exhibit 1). On the surface, it appears that the Europeans are adopting correct policies as the Eurostoxx index has surged over the past year, and broken above the levels reached prior to the debt c…

Detroit bankruptcy — One year later

Ty Schoback, Senior Municipal Analyst | August 18, 2014

…ilapidated to carry through with the bond indenture pledge to “levy ad valorem property taxes sufficient to meet debt service, without limit as to rate or amount.” There is no question Detroit’s tax base has suffered significant erosion. However, that argument remains an open question when considering the full terms of the settlement. While 100% of the voter-approved property tax levy for UTGO debt service payments will remain in force, post-bank…

Global market mid-year outlook

Mark Burgess, Chief Investment Officer, Threadneedle Investments | June 16, 2014

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 for profits. Global equities and global bonds made progress in May with the former outpa…

Missing links and multipliers

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | June 9, 2014

Several forces are colliding now and causing a downshift in the trajectory of the U.S. housing recovery. Household formations remain at multi-year lows due in large part to mediocre income and job gains in combination with high student loan debt by 25 – 45 year old homebuyers. Fewer homeowners mean missing multipliers for growth. As a result, housing will prove less of an accelerator for economic growth in the period ahead. Having witnessed a…

The role of income inequality

March 3, 2014

…istribution in combination with an unsustainable rise in borrowing as a causal factor that escalated the crisis. Debt levels relative to income escalated during the same period, but more perilously for the bottom 95% (see Exhibit 2). Debt is merely borrowed spending from the future, and becomes particularly onerous if incomes do not rise in concert. A study by Cynamon & Fazzari postulates that in the recession’s aftermath, tighter borrowing s…

M&A in healthcare – Out with the old, in with the new?

Harlan Sonderling, CFA, Senior Healthcare Analyst | March 31, 2014

Recently the market has been quite optimistic about merger synergy promises. History suggests investors should be diligent about analyzing acquirers’ claims around merger benefits and returns. While attractive acquisitions may lie ahead, it is critical to continue to carefully evaluate acquirers’ strategies and claims. The “old” healthcare M&A In the “old days,” pharmaceutical Company A would announce its acquisition of Company B for stock…