Perspectives Blog

U.S. rates — View update

Zach Pandl, Portfolio Manager and Strategist | April 4, 2014

…of labor market slack in general. Few serious observers think the U.S. economy is running at full capacity—the unemployment rate is still 6.7% after all. The disconnect is that slack in the economy looks on par with a typical recession, but monetary policy is calibrated for something much worse. At this point we do not see that much ambiguity in the data around this issue (see some of our research here), so our views have not changed after today’…

An improving outlook for European equities

Philip Dicken, Head of European Equities, Threadneedle International Ltd | October 18, 2013

Economic data confirm that the Eurozone has exited recession. There are signs that corporate transactional activity is increasing as businesses become more financially secure. While Europe remains beset by challenges, the economic background is improving, valuations are looking more attractive and investors who have not been paying attention to European stocks may want to take a closer look. According to Eurostat, the 17 eurozone member states…

The perils and pitfalls of buying individual municipal bonds

James Dearborn, Head of Municipal Bonds | February 27, 2014

…nsured bonds, analysts at rating agencies are now required to follow a larger numbers of issuers. This increased workload comes at a time when many state and local governments are still addressing the lingering effects of the recession as well the ramifications of depleted pension funding. These factors have been exacerbated by the ratings recalibration, a large scale rating adjustment that resulted in sweeping credit upgrades. In 2010, Moody’s a…

Flexible income strategies — Avoiding side effects from the Fed’s medicine

David King, CFA, Senior Portfolio Manager | August 11, 2014

…te risk. To increase an investor’s chances of success, an investment strategy needs the flexibility to look beyond the most visible asset classes with the most homogeneity and highest correlations. The U.S. economy went into recession in 2008, and it looked serious. As our fiscal deficit piled up, the political appetite for high government spending waned, leaving monetary policy as the primary available weapon to prevent recession from becoming…

Dovish feathers showing through

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

…t, Yellen made clear last Monday that she views the “extra slack”—that portion not accounted for by the U3 unemployment rate—as extremely costly. She said, for example: “In some ways, the job market is tougher now than in any recession”. Second, the FOMC meeting minutes hinted that the upward shift in the funds rate forecasts may have overstated the change in the views of the committee leadership (although there remains some question about exactl…

What to make of the rebound in emerging market equities

Dara White, Senior Portfolio Manager | April 14, 2014

…s the market is getting excited a little too early about the prospects of change. With reservoir levels running at historic lows, the country will very likely face energy rationing, which may push the economy into a technical recession. Finally, valuations are not as cheap as they might first appear at 10x earnings and 1.5x book value. If you take a closer look at the index constituents and exclude the Chinese banking and Russian energy sectors w…

Q2 fixed income outlook – Hitting for the cycle

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

…new-issue volume Source: JP Morgan The economic cycle is favorable at this stage, but much less advanced than the credit cycle. While moderate growth continues, the economy has yet to recover all of the jobs lost during the recession, and unemployment is still above the Fed’s target. The U.S. housing market is improving on the back of reduced supply, labor market improvements and overall confidence. We believe this creates opportunities for bon…