Perspectives Blog

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…

Puerto Rico’s turbulent ride

Michael Taylor, Senior Municipal Analyst | September 26, 2013

…Puerto Rico’s persistently struggling economy and detailing widespread mutual fund exposure to Puerto Rico bonds, spreads widened considerably, with yields on longer-dated triple-tax-exempt Puerto Rico General Obligation (GO) debt trading in excess of 10% (from 7%) at times. Exacerbated by industry-wide mutual fund outflows, and perhaps some forced-selling, 2013 has proven to be the worst year for Puerto Rico bonds in over a decade. According to…

The role of income inequality

March 3, 2014

…e global financial crisis. Most studies now point to the lack of income growth for the bottom 95% of the income distribution 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 ri…

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

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

…ccrued more to the selling shareholders than to the acquirer’s. More often than not, Company A’s stock price would decline on the day of the announcement, and Company B’s would rise as Company A diverted from dividend growth, debt reduction and using its cash to invest in organic growth. Investors assumed, until proven otherwise, that acquisitions were value destructive, at best a means of manufacturing earnings to manage through a period of poor…

In the land of 7 footers, 6’8″ plays guard

Fred Copper, Senior Portfolio Manager | May 5, 2014

…r each year for the next five years is a powerful incentive for investors to hunt for returns that will at least not be certain to lose money in real terms, even if that means dabbling in asset classes such as emerging market debt that until recently were considered too racy for a standard portfolio, or indeed buying stocks after six years of sharp gains. This risk taking behavior is an intentional and essential part of central bank policy. Post…

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

We have started to reduce exposure to high-quality bonds with limited upside potential and high-yield bonds in which credit risk appears too aggressive. Following weakness last year, emerging market debt has posted gains this year, and we expect further strength ahead as volatility subsides. While we expect a flatter yield curve over the next few months as investors focus on the timing and pace of rate increases, we don’t think they should avoi…