Perspectives Blog

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…

Asset allocation – Kinetic vs. potential energy

Columbia Management Global Asset Allocation Team, | August 4, 2014

…/E ratios At the beginning of the year, we expected the U.S. to pass the baton of strong positive performance to the international markets, particularly Europe where hopes were high that the economy was finally edging out of recession. Instead, the European economy has continued to show signs of disinflation, prompting the European Central Bank (ECB) to introduce new stimulus measures in June. Analysts have also reduced earnings growth estimates…

Does it still pay to hold municipal bonds?

Anders Myhran, Municipal Portfolio Manager | July 29, 2014

…termediate-maturity index has never registered a negative two-year total return. Also, the two-year return of the longer-maturity broad muni market index fell below zero only briefly in late 2008 during the worst of the Great Recession, and even that selloff was quickly reversed. Importantly, there were several periods during which yields increased significantly: on two occasions, the 10-year Treasury yield increased between 225 and 250 basis poi…

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…

Slack and inflation

Zach Pandl, Portfolio Manager and Strategist | July 21, 2014

…ging by this standard, the unemployment gap today is less than one percentage point, implying a small amount of remaining labor market slack and only modest downward pressure on inflation (Exhibit 1). However, the most recent recession and slow recovery have raised questions about whether this definition of full employment remains valid. Exhibit 1: Unemployment rate suggests only small amount of labor market slack Unemployment rate (%) Sources:…

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…