Perspectives Blog

Signs point to an improving U.S. economy

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

…lthy across industries and average hourly earnings is up a steady 2% in the last year. The revised third quarter GDP report was also released but was really a look in the rearview mirror. The headline gain was revised up to 3.6% (from 2.8%), but this only appeared impressive on the surface. Nearly half of the growth came from a massive inventory build, and this will subtract from Q4 GDP. Metrics on final demand weakened and consumer spending was…

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…

A less certain world favors high-quality stocks

Philip Dicken, Head of European Equities, Threadneedle International Ltd | October 6, 2014

Current sentiment indicators do not suggest that Europe is heading back towards recession, though GDP growth will remain subdued. If Q3 sees a rebound, full QE may be unlikely this year, but any further weakness will increase the pressure on the ECB to act. In a less certain growth environment, we believe stocks that are able to deliver earnings growth will command a justifiable premium. Recap: excessive optimism at the start of 2014 As 2014 b…

Is Europe heading for Japanese-style deflation?

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

Although there are many differences that should ensure that the eurozone does not follow Japan‘s fate, policymakers will need to act forcefully if the risk of deflation intensifies. While the euro area appears to be on track to avert deflation in the short term, many euro countries are “one crisis away from deflation.” The European Central Bank (ECB) claims to be ahead of the game, but policy needs to be more pro-active. The following is an ex…

European equities – Should investors care about periphery vs. core anymore?

Dan Ison, Portfolio Manager | January 13, 2014

…economy, Italy hasn’t grown in more than a decade. While the UK has likely enjoyed the strongest European GDP growth in 2013, her equity market has lagged many of the major markets in Europe. Here we find a simple explanation — market structure. With 25% of the UK market comprising commodities and oil, and a further 28% in defensive growth sectors, the UK in market capitalization terms can be considered quite unrepresentative of UK GDP. Th…

ECB asset purchases — Bazooka or damp squib?

Martin Harvey, Fund Manager, Threadneedle International Ltd | September 22, 2014

With inflation expectations declining to the levels that preceded the recent shift in policy, should the ECB and the financial markets be worried? In our view, the ECB probably won’t be wholly impressed by the reaction of inflation expectations to recently announced measures, and will be keeping a close eye on favored measures. We believe that we would need to see a further significant deterioration in growth and inflation expectations to kick…

What should U.S. bond investors expect in 2014?

Zach Pandl, Portfolio Manager and Strategist | January 6, 2014

The timing of the Fed’s QE exit is no longer the central question An accelerating economy could mean another challenging year for duration risk A major question is whether markets begin to doubt the Fed’s commitment to low rates If bond investors were asked to summarize 2013 in a single word, we suspect that many would pick “taper.” The question of when the Federal Reserve (the Fed) would begin dialing back quantitative easing (QE) dominated m…