Perspectives Blog

Gaps, not growth

Zach Pandl, Portfolio Manager and Strategist | February 25, 2014

Monetary policy is primarily about “gaps” not growth: the Fed is trying to reduce spare capacity in the economy, not bring about a rapid expansion per se. Despite concerns over cyclical weakness in labor force participation, the unemployment rate is sending similar signals as most other output gap proxies. The output gap improved despite a relatively slow expansion, suggesting weak potential growth. While it’s far too soon to revise any medium…

U.S. rates — play for growth

Zach Pandl, Portfolio Manager and Strategist | December 10, 2013

…y shutdown and November benefitted from the bounce back). U.S. growth indicator, % annualized Broadly speaking, improving activity data should bring forward the timing of tapering and probably motivates some reworking of the Fed’s communication framework. There remains a great deal of uncertainty about the details, however. Given the decline in the unemployment rate to the symbolically important level of 7.0%—the original guidepost for the end d…

Fixed income outlook: From liquidity to growth

Gene Tannuzzo, CFA, Senior Portfolio Manager | July 10, 2013

Bond market performance weakened following Fed comments on tapering QE. Over the next couple of quarters, we expect a transition from a market priced for liquidity to one priced for growth. We believe markets will eventually begin to focus less on the Fed and more on the fundamentals of a slowly improving global growth story. Global bond markets have been under siege for much of the past two months. Looking back to April, the bond market, in o…

Gut check: The outlook on fixed income

Colin J. Lundgren, CFA, Head of U.S. Fixed Income | February 24, 2014

The next big move in rates may be triggered by concerns about possible future Fed rate hikes. High-quality bonds may struggle to generate coupon-like returns. Emerging markets may ultimately benefit from the synchronized uptick in growth in global developed markets. With nearly two months of the year behind us, we thought now would be a good time to see how the fixed-income market is faring in 2014 and assess our outlook. We asked our investme…

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…

Q2 fixed income outlook – Hitting for the cycle

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

…ic 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 bond investors in the non-agency mortgage market,…

Learning to stand on your own

Colin Moore, AIIMR, Global Chief Investment Officer | June 27, 2013

Markets must now learn to cope with less support from Fed. I believe investors will adjust to the higher confidence regarding sustainable growth and the risk premium will fall more than the slow rise in rates. Equity markets will likely recover, but expect some stumbles along the way. Awww! The equity market is learning to stand on its own without the Federal Reserve holding its hand. There will be moments when it ends up on its bottom but the…