Perspectives Blog

A tepid cyclical lift

Tom West, Director of Equity Research | April 28, 2014

Cyclical investment and discretionary spending are on track to deliver earnings growth of 7% in the S&P 500. Strength in some consumer durables appears more of a “wallet share” gain than a general lift due to recovering wages or a release of excess savings. Construction and energy are poised for another year of growth, while “enterprise” spending and investment in the tech sector remain challenged. The S&P 500 Index should grow earning…

India’s new government fires investor enthusiasm

Natasha Ebtehadj, Fund Manager, Threadneedle International Limited | September 8, 2014

…ey are a step in the right direction and will improve the functioning of the current government system. Economic growth and the pace of reform to accelerate? The pace of reform should accelerate as the government addresses the fundamental problems plaguing various ministries and the economy, and growth should subsequently pick up. Investments could well lead the recovery, especially considering that new project starts have fallen to historical lo…

Triangulating on 2014 corporate earnings

Tom West, Director of Equity Research | January 27, 2014

…e best estimate, the other two methods can be useful in testing the result We look at top down build-up earnings growth for the S&P 500 and growth expectations by sector to arrive at an EPS growth estimate for 2014 I generally think the best way to build up an estimate for the S&P 500 Index total is bottom-up, company by company, each with its own puts and takes, internally generated growth, acquisitions, divestitures, etc. But it is als…

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

Dan Ison, Portfolio Manager | January 13, 2014

…nomy, 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. The mi…

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

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

…ral question in the interest rate outlook. Instead, at the start of 2014, market attention is now turning toward growth. Unlike most asset classes, government bonds and other interest rate-sensitive securities tend to perform best when the economy performs poorly—when growth and inflation are falling and the Federal Reserve eases monetary policy. Exhibit 1 shows this relationship using returns over the last three decades. Treasuries show up in th…

Slow growth: Why is it here and will it stay?

February 24, 2014

There is no consensus on the root causes of slow growth. As economists seek explanations, the secular stagnation theory has re-emerged. Strong evidence suggests the neutral real rate has fallen. (But is it negative? We explore this question in this continuing series over the next few weeks.) By Marie Schofield, Chief Economist and Toby Nangle, Head of Multi Asset Allocation The idea that economies may be undergoing a long period of slow growth

Income inequality, disinflation and profit growth – the role of globalization

March 10, 2014

…ries like China. Interestingly, despite levels of inequality rising within individual states, the rapid economic growth seen at the overall economy level for EM has seen global inequality — measured at the household level — first plateau and then decline at the margin over the past 30 years (at admittedly extremely high levels). Exhibit 1: Real income growth at various percentiles of global household income distribution, 1988-2008 (in 2005 PPPs)…