Perspectives Blog

Gaps, not growth

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

…ts structural rate. Okun’s Law is at the center of today’s biggest policy debate. Since the recovery began in the second half of 2009, GDP growth has increased at an average annualized rate of just 2.4%. Before and during the recession, most economists thought that potential GDP growth was greater than 2.5% (based on various forecaster surveys). Thus, the Okun’s Law equation above would have implied a worsening output gap, because GDP growth was…

What’s the outlook for muni bonds?

James Dearborn, Head of Municipal Bonds | June 19, 2014

Strong YTD performance resulted from falling rates, a dearth of new supply and a resurgent demand by investors seeking attractive taxable-equivalent yields. We believe municipal bonds should continue to perform well in the second half of 2014. Yields on muni bonds are compelling when considering the impact of taxes on non-exempt securities. As we reach the halfway point of 2014, it’s a good opportunity to review our full-year outlook for the m…

Special report – 2014 mid-year review and outlook

Columbia Management, Investment Team | June 16, 2014

…imism about the global economic recovery, as well as easy monetary policy from the Federal Reserve, European Central Bank and Bank of Japan. Outlook: The U.S. economy has made considerable progress in the five years since the recession ended. Inflation, unemployment and broader measures of labor utilization have all moved closer to the Federal Reserve’s targets. Against this macroeconomic backdrop, interest rates in most developed markets look un…

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…

Should your income be fixed?

David King, CFA, Senior Portfolio Manager | December 16, 2013

…bonds, bank term deposits, savings accounts, etc. has been to provide an adequate rate of return with low risk. If these investments will do that today, this discussion is over; but will they? The event we now call The Great Recession have wrung inflationary expectations out of the global economy. All major commodities, whether gold or oil, cotton or corn, are priced well below their peak levels of recent years. Recipients of government payments…

Labor market takes center stage

Zach Pandl, Portfolio Manager and Strategist | October 15, 2013

…conomic fluctuations—by stabilizing real activity. I thus translate the ‘maximum employment’ proviso of the Federal Reserve Act as a mandate for the Fed to lean against the wind, stimulating the economy when the economy is in recession or unemployment is clearly in excess of the NAIRU (the non-accelerating inflation rate of unemployment—the minimum rate of unemployment consistent with stable inflation), and restraining the economy through tighter…

The Fed’s decision tree

Zach Pandl, Portfolio Manager and Strategist | October 8, 2013

…l need to wait for more communication to get a clearer picture on the direction for policy. For the time being we are thinking about the QE outlook as a simple decision tree as shown in the diagram (for simplicity we ignore a recession scenario). If incoming data appear strong over the next few months, we think the outlook for QE would be straightforward: the Fed would begin to taper at the December or January FOMC meeting. This would certainly b…