Results 51–100 of 134 found.
Addressing Our Chronically High Unemployment Rate
Anyone who listened to President Obamas speech to Congress last Thursday should have come away with one overriding theme: His goal for the remainder of his first term in office is jobs creation. But the stubborn persistence of extremely high unemployment since the Great Recession officially ended over two years agoalong with the massive stimulus spending and record low interest rates that accompanied efforts to revive the economysuggest the challenge were facing in lowering unemployment is unlike any weve faced in past recessionary recoveries since World War II.
Congressional Budget Office Updates Its Economic and Fiscal Forecast
Two weeks ago, the non-partisan Congressional Budget Office (CBO) released an update to their Budget and Economic Outlook that forecasts U.S. fiscal and macroeconomic trends over a ten year period (2012 to 2021). This update creates a baseline for negotiations by the Joint Select Committee on Deficit Reductionthat committee of six Democrats and six Republicans from Congress created by The Budget Control Act of August 2011 which resulted from the contentious debt ceiling negotiations in July. In this Weekly Market Update, well review what this baseline
Updated Ideas for Fixed Income Positions
The current environment and related factorsincluding double-dip recession concerns, equity and high-yield corporate bond market volatility, moderate inflation expectations in the near term, and premium pricing for U.S. Treasury securitieshave raised questions for investors as they return from summer activities and re-examine fixed income investment positions. It is difficult to address all investor situations and scenarios. So for our hypothetical allocations in this piece, we will focus on fixed income positioning within employer-sponsored retirement plans, both qualified and non-qualified.
Perspective on the Fed, Inflation, and the Economy, as Well as Implications for Income Investors
The Fed recently took the unprecedented step of declaring their interest rate policy for the next two yearsthey will be holding their short-term rate target essentially at zero well into 2013. Well give our perspective on why the Fed has taken this unusual step, and what these policy decisions tell us about the state of the economy, inflation, and the bond market. Finally, well address potential solutions for income-oriented investors in todays environment of record-low bond yields.
The GDP Growth Downgrade
While much of the nation focused on events leading up to the credit rating downgrade for the U.S. by Standard & Poors last week, this was preceded by another downgrade to the estimates of our recent, past gross domestic product (GDP) growth, which was announced by the U.S. Bureau of Economic Analysis (BEA) on Friday, July 27. While garnering much less attention, this revision has some serious implications for our economic outlook at least through the end of this year.
A Primer on Debt, Deficits, and Economic Growth
The recent kerfuffle in Washington over the extension of the debt ceiling presented investors with many competing arguments and seemingly contradictory information. On the one hand, we hear that debt is bad for growth. On the other hand, we are told that government spending is key to supporting the economy. And why is it that stocks tanked after an agreement was reached to avoid default and extend the debt limit? In this Weekly Market Update, we will try to provide some context for understanding these competing positions, as well as the recent market reaction to these events.
Insights from the 2010 Census
The good news is that while we are aging as a nation, we are also growing both in absolute size and the size of our young population. How quickly we grow is tied to a number of factors. But two of the most important are continued healthy economic growth (where a sense of growing affluence and economic possibility is a strong incentive for young adults to have children) and how liberal or restrictive our future immigration policy will be. Based on how these factors play out, we could easily be a nation of 450 million (or more) to 360 million (or less) just in the next four decades.
Why We Think the U.S. Wont Default on Its Debt
We believe its highly unlikely that the U.S. government will miss any of its scheduled debt payments in coming months, or that related market uncertainty and volatility will cause our money market funds to break the buck (be forced to transact share purchases and redemptions at prices less than the usual $1 per share). To help explain market behavior under unstable conditions, we often repeat the following adage: investment markets hate uncertainty. We tend to be leery of uncertainty because it can trigger investor skittishness, irrational behavior, and volatility.
We See This Slowdown as Temporary Too
We?re experiencing another mid-year economic slowdown, with renewed fears of a double-dip recession. Will the recovery regain momentum, like last year? The fixed income team, thinks so. Two years after the Great Recession ended, we?re still struggling to escape its lingering grip. Major facets of that struggle include the market and financial extremes the recession generated. U.S. economic growth and financial market benchmarks are striving to shift back to more normal/average levels. These cyclical shifts from historic extremes interest us as sources of potentially value-adding positioning.
Lessons from Investor Behavior Studies: Better to Have Patience and a Plan
Recent studies raise important questions about investor behavior and the likelihood that investors will successfully reach their financial targets. It seems that the best way to increase the odds of investing success is to take a balanced approach, providing exposure to the broad asset classes without leaving investors overexposed to any single area. Risk and financial reward exist in relation to one another. But diversification works on the principle that the relationship is not linear?you have the potential to get more return for each unit of risk you take by spreading out your investments.
Macroeconomics and Presidential Elections
It?s now just 16 months until our next presidential election. Republican candidates have already begun the long process of party debates and fund-raising efforts. President Obama wasted no time as well, launching his re-election campaign effort in March. This upcoming election will likely focus on the economy and involve major debates over taxation, spending, job creation and the fundamental role of the government in our economy. As a result, the election outcome could have significant consequences for the types of policies, incentives and legislation that will be pursued post-November 2012.
We?re Still Patiently Positioned for a Flatter Yield Curve
In this Weekly Market Update, we discuss the steep Treasury yield curve and our yield curve flattener trade. This economic cycle-based, duration-neutral, mean-reversion strategy?and how it fits with our other active positions?helps illustrate the investment process and outlook of the fixed income team. The gap between short- and long-maturity U.S. Treasury yields has been at or near historically wide levels since 2009. It?s an interesting facet of the latest economic cycle. One of our active positions is tied to an eventual narrowing of this spread to a more historically average level.
The Economy Hits a Soft Patch?But How Soft and How Long?
Most economists concur that the economy recently has hit a ?soft patch.? The revised estimate of first quarter GDP1 growth was only 1.8% on an annualized basis. Nonfarm payrolls grew only 54,000 in May, a substantial downward change from February to April when approximately 200,000 new jobs were added each month. And average housing prices have now declined for six consecutive months. The question investors are asking is whether this slowdown is temporary or a sign of a longer-term slowdown that is coming just as the Fed winds down its latest round of monetary stimulus at the end of June.
Gold at $1,500 an Ounce: Speculation or Fundamental Demand?
We believe gold?s performance in recent years and current price above $1,500 an ounce reflect solid fundamental demand, rather than speculative fervor. A key driver of gold demand in the current environment is buying by central banks around the world. In addition, it appears that investors looking for a hedge against both the falling dollar and broader economic uncertainty have been buying gold for its diversification benefits. Jewelry demand in India and China are other, underappreciated positives.
High Unemployment Remains a Substantial Challenge for the Economy
Continued high unemployment and weak residential housing prices are two hangovers from the Great Recession that continue to act as brakes on the economy and current recovery. Some analysts say the housing problem is a several-year process of allowing prices to fall to where demand recovers. But the housing market is closely related to the labor market and the unemployment problem. However, no one has a definitive analysis of what?s wrong or what is needed to bring unemployment down from 9%. And adopting the same laissez-faire approach as the housing market is clearly not a solution.
Global Mergers and Acquisitions Activity Continues to Rise
Mergers and acquisitions activity is on the rise worldwide. In the U.S. this increase has been accompanied by the return of mega-deals ($10 billion+) driven primarily by large multi-national corporations flush with cash. These deals (and the anticipation of more to come) have helped drive markets up in the first quarter of this year. But the question on the minds of many investors is whether acquiring companies are at risk of overpaying for acquisitions that?while deemed ?strategic?-may only end up transferring (not creating) value from shareholders of the acquiring to the acquired companies.
Explaining U.S. debt levels, credit ratings, and recent bond market behavior
This week, we discuss the U.S. debt ceiling and the credit ratings for U.S. sovereign debt, plus explanations for seemingly counterintuitive bond market behavior. To fully comprehend the ceiling, we should first review the U.S. federal debt it?s attempting to cap, and why. The U.S. federal debt reflects what the U.S. government has to borrow to help pay for its multitude of operations, services, and financial commitments. Like some of its citizens, the U.S. government has been living beyond its means in recent years, spending more money than it has in reserve or receives in tax revenues.
The Value of Gold Company Stocks and Gold?s Role in a Diversified Portfolio
Two questions we?ve heard a lot lately are ?Why haven?t the stocks kept pace with the metal?? and ?What?s the right amount of gold for my portfolio?? The recent disparity in performance between gold bullion and gold mining stocks is largely down to concern about higher costs to extract and refine the metal. Compare those fears with conditions in 2009 and 2010, when gold mining stocks did very well as the price of gold bullion surged, while changes in production costs were comparatively tame. This meant better top-line revenue and margin figures, making for attractive stock performance.
Corn Price Increases Tell a Story About Why Commodity Prices Are Rising
In case you haven?t been watching, the price of corn for delivery in July (a futures price set on the Chicago Board of Trade) rose 35% just in the month of April from $216 to $293 per metric ton. As both a commodity and agricultural product, the demand and pricing of corn can provide interesting insights into whether inflation is rising, why and (if so) what factors are driving it. In this Weekly Market Update, we?ll take a look at the market dynamics for corn, what is driving recent price increases and how this is likely to unfold over the remainder of this year and beyond.
Weekly Market Update
Total returns began looking better for municipal bonds (munis) after mid-January this year as issuance eased and a wave of non-traditional (not tax-exempt income-seeking) buyers entered the market in pursuit of relative value and return opportunities provided by falling muni prices and rising yields compared with those of Treasuries. But the rewards from that influx of demand have not been uniform across the muni market, the non-traditional ?crossover? buyers have targeted some segments much more than others, creating a divided market that has rewarded some investors at the expense of others.
Retail Sales Continue to Grow?and Raise Questions About the Consumer
Last week, the U.S. Commerce Department released its monthly report on retail sales for March. With gasoline prices up almost a dollar over the past six months and consumer demand already challenged by sagging home prices plus high unemployment, investors and analysts were eager to see if the streak of eight months of positive growth in retail sales through February could be sustained in March. And the answer was ?Yes, but barely.?
Expectations Are High for Continued and Impressive Earnings Growth
This week marks a quarterly ritual on Wall Street where companies report their actual financial results for the most recent quarter, and analysts use these results to update their forecasts for companies, including their target share price and sell or buy recommendations. Most expect to see a continuation of the growth that began in 2009 as the economy was struggling to exit the Great Recession. This recovery of U.S. corporations has been the one bright spot for our economy, which continues to struggle with high unemployment, record government budget deficits and a weak housing market.
Weekly Market Update
?Dodd-Frank? is shorthand for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The main focus of the legislation is on increasing regulation/supervision of banks and other major players in derivatives, lending, and securitization businesses. Few of the law?s provisions are aimed directly at the registered fund industry, likely reflecting the industry?s distance from the 2008 financial crisis and general effectiveness of the framework already in place. Nevertheless, a number of provisions could affect mutual funds and their investment advisers in meaningful ways.
Weekly Market Update
Last week brought more bad news regarding the residential housing market. There were declines in sales volume of both new and previously occupied homes for the month of February. Additionally, one major and closely followed home price index exhibited a 3.1% decline in January, marking the fourth consecutive month of price declines for this index. In most regional markets, the situation remains deflationary as prices continue to slip and (as is characteristic of deflationary markets) demand declines as buyers await further price declines before jumping in.
Mixed Fed Messages Reflect Murky Outlook
Mixed. Unsettled. Not altogether reassuring. Sounding a lot like the current state of the U.S. economy, that was the tone of the policy statement issued March 15 by the open-market operations committee of the U.S. Federal Reserve. It certainly didn?t provide comfort to those fearing that the Fed is in the process of fueling future inflation flames, nor did it offer any encouragement to savers hoping for higher short-term interest rates in the near future. What the statement did accomplish was help support the economic, inflation, and Fed policy outlooks of the fixed income team at ACI.
Could Gasoline Price Increases Affect the Economic Recovery?
The recent political uprisings in N. Africa have had a major impact on oil and gas pricing here in the U.S. Increases in energy prices have a negative impact on consumer disposable income and confidence, not just in the U.S but globally. When gasoline prices spiked in July 2008, consumer spending posted its biggest one month decline since September 2001. Higher energy prices also contribute to increases in the overall rate of inflation. These are risk factors in terms of sustaining our current economic recovery, bringing down unemployment, and continuing to drive growth in corporate earnings.
Turmoil in the Middle East: Should It Have Been Predicted?
The turmoil began, when a young Tunisian college graduate immolated himself on December 17 after being harassed by police as he attempted to sell fruit on the street. Some claim the vendor, Mohamed Bouazizi, did not have the money needed to bribe police officials to continue peddling and earn a living. He died on January 4, sparking deadly demonstrations and riots throughout Tunisia (now called the Jasmine Revolution) in protest of social and political issues in the country. And just 10 days later, on January 14, President Zine El Abidine Ben Ali was forced to step down after 23 years.
January?s Employment Situation Report Generates More Questions than Answers
The conflicting trends in the January Employment Situation report has forced all labor market observers to wait for February?s report in hopes of discerning some clearer trends. Generally speaking, the underlying trends are positive, as we?ve shown using the JOLTS data. On the other hand, things are not nearly as strong as the .8 percentage point drop in the official unemployment rate over the past two months would suggest. And that rate will likely rise again in the short term before it begins a long-term trend back to levels consistent with full employment and a healthy economy.
Responding to the Stubbornly Steep U.S. Treasury Yield Curve
Disciplined, active investment managers are constantly on the lookout for capital market extremes, which can provide value-adding opportunities for investors. One such market extreme has been developing in the U.S. Treasury market for the past three years, reaching historic levels in 2010 and earlier this year. We?re talking about the very wide, stubbornly persistent gap between short- and longer-maturity U.S. Treasury yields.
The Housing Market Remains a Weak Link in the Current Recovery
Recent data on single family home selling prices for the 20 largest metropolitan areas in the U.S. indicate that prices in most markets continue to decline. The monthly decline for the Case-Shiller Home Price Index was -0.5% in November, which marks the 5th consecutive monthly decline. So while other measures of our economy such as GDP growth (3.2% annualized increase for the fourth quarter of last year) or corporate profit growth continue to show solid progress, home prices?which are important in affecting consumer confidence and spending?continue to exhibit vestiges of deflation.
Deconstructing the Current Inflation Conundrum
As the old saying goes: ?The best time to buy flood insurance is when the river is still running low.? We suggest not waiting until inflation pressures increase further before making sure you have some inflation insurance in your portfolio.
World Bank Says Developing Countries Driving Global Growth
During the recent Great Recession, developing countries such as China and India played a key role in sustaining global economic growth, while developed economies struggled to cope with issues such as the subprime market meltdown, sovereign debt issues, and soaring unemployment numbers. In the coming years, developing nations will continue to play an increasingly important role in driving the global economy.
December?s Unemployment Report Masks Lingering Challenges
On January 7, the U.S. Bureau of Labor Statistics (BLS) issued its Employment Situation report for the month of December. On the surface, the news appeared very good: The national unemployment rate dropped 0.4% from 9.8% to 9.4%. That is the lowest rate of unemployment we?ve experienced in nearly two years (April 2009 was the last month unemployment that was under 9%). And nonfarm payroll employment increased in December by 103,000. However, financial markets reacted with some pessimism that day. Overall, the S&P 500 declined 0.2% while broader indices also registered slight declines.
Inflation a Growing Concern for Emerging Market Countries
As a group, emerging market countries have rebounded from the Great Recession in much better shape than developed economies. And driven by higher commodity prices, robust domestic consumption, and a growing middle class with buying power, the emerging market asset class appears poised for more growth heading into 2011. While investors have been focusing on the European debt crisis, however, many emerging market economies have been getting a little overheated from the rapid pace of growth, and inflationary fears are quietly becoming a daily reality.
Understanding Recent Municipal Bond Market Volatility
Municipal bonds have fallen in price recently. The price drop is not due to a new significant credit event or default, but rather, the decline is being driven by a host of other factors such as rising interest rates and a lack of liquidity stemming from increasing municipal supply, uncertainty surrounding the extension of Build America Bonds and the Bush tax cuts, and reduced investor demand. While municipal bond price volatility may continue into the beginning of 2011, we believe that municipal bonds still offer value over a long-term time horizon.
Demographics and Sovereign Debt
Events surrounding what the press calls the European Sovereign Debt Crisis have been in the news for much of the past year. Unfortunately, this label masks an underlying major contributing factor: demographics. The combination of long life expectancies, relatively early retirement ages, generous retirement benefits and a shrinking base of workers to support the growing proportion of retirees in the population will put tremendous burdens on the budgets of these countries.
Encouraging Signs of Life from the U.S. Consumer
Early data from the start of the 2010 holiday shopping season indicate this could shape up to be the best year for consumer spending (and retailers) since 2005. Some have attributed this simply to consumer psychology based on pent-up demand and frustration after nearly three years of relative austerity. However, there are other indicators suggesting that consumer finances are at least on the mend.
'Shadow' NAVs for Money Funds Available
In January 2011, so-called "shadow" net asset values (NAVs) for money market funds (MMFs) will become available publicly for the first time. They will be posted by the SEC on their Web site 60 days after they are filed monthly with the commission by fund management companies, including American Century Investments(R). As one of the investment industry's MMF pioneers, American Century Investments supports the new regulations and manages five MMFs.
Bond "Bubble" Fears Overblown
In this paper, we consider the argument that there is a bond ?bubble? in the context of current economic and market conditions. We examine academic literature for commonly accepted characteristics of speculative bubbles, finding little evidence to support the notion that the bond market is currently experiencing a ?bubble.?
Global Tensions Rising Over Fed's QE2 Initiative
QE2 represents a dramatic intervention in the capital markets, and its ultimate impact is hard to predict at this point in time. Critics of the plan, including some Fed members, believe that too much monetary stimulus might lead to runaway inflation, which in turn could derail economic growth or even create future asset bubbles. Alternatively, a weaker dollar could create incentives for other countries to implement capital controls and foreign exchange interventions that negatively impact global trade.
Education, Employment and Earnings
American Century Investments analyzes salary growth, real wages, and unemployment levels as a function of education levels to conclude that education plays a crucial role in our economy and in determining the opportunities for employment, the risks of unemployment and the level and growth of wages within our society. This was true 70 years ago when earning a high school diploma put one in a minority of workers, and it is even truer today when earning a bachelor?s degree or more is one of the best options a young adult can pursue to ensure a prosperous future.
Latest GDP Growth Report Points to Continued Economic Weakness
After one quarter of robust gross domestic product (GDP) growth late last year - characteristic of an economy snapping out of a recession - the trend that has followed has been very uncharacteristic, with a substantial downward shift in GDP growth. American Century Investments investigates quarterly shifts in consumer spending and investing and other factors that effect GDP.
'Bubble' Bashing Does Not Imply a Risk-Free Bond Outlook
The present bond environment still doesn't fit previous 'bubble' profiles. We are, however, in a period of historically low interest rates and Treasury bond yields, with more room to rise than fall. Future bond price declines are a realistic expectation, but these declines are unlikely to rival other post-bubble, extended price plunges. Bonds continue to provide a cushion for equity exposure in diversified portfolios and a source of steady income for those who need it.
Have the Financial Markets and the Real Economy Become Disconnected?
There are solid and logical reasons why equity markets have been up substantially since the start of the third quarter. The U.S. economy remains in a fragile situation and the global financial system is far from healthy. Nonetheless, progress is being made and, barring any new crises or setbacks, the case for the market's recent rise can be justified. What's different this time is that two sectors that have traditionally led economic recoveries in the U.S. - consumer spending and real estate - will remain on the sidelines for the foreseeable future.
The World According to TARP
Taken together, initiatives enacted under the Troubled Asset Relief Program will provide up to $45.6 billion in home mortgage foreclosure relief. Proponents of these programs argue that if they finally stabilize the housing market and pricing, all homeowners will benefit. Opponents believe they create a huge problem of moral hazard in the residential housing market. They also point out that stabilizing home values above what may be a lower floor based on market supply may preclude other individuals from being able to enter the market and purchase a home they can afford.
The Great Depression, the Great Recession and Lessons from 1937-1938
While much shorter and less severe than the Great Depression, the recession of 1937-1938 added approximately three years to the recovery period. It is extremely unlikely that we will see a repeat of this type of recession. However, depending on the outcome of elections in November, there could be substantial shift in the fiscal and taxation policies of the federal government away from Keynesianism and toward fiscal discipline and supply side economics.
Challenges and Solutions for Income-Seeking Investors
The Fed's prediction that it will keep its short-term interest rate target at 0-0.25 percent for 'an extended period' continues to affect the near-term game plan for risk-averse investors and savers. A period of potentially heightened uncertainty and low absolute returns means that maximizing risk-adjusted returns is crucial to investment success over time. An optimized mix of fixed income holdings with a variety of different risk levels can add value to investor portfolios in this low-yield and low interest rate environment.
Is Deflation Still a Risk?
Last Friday's Consumer Price Index report found that prices rose 1.1 percent on an annual unadjusted basis in August. Because the U.S. Federal Reserve Open Market Committee noted in last week's statement that inflation is currently at levels somewhat below what it judges to be consistent with long-run price stability, some have suggested that the central bank is still concerned about deflationary pressures in the economy. Whatever happens, one thing is clear: As long as the residential housing crisis drags on without resolution, the risk of deflation should remain a concern for investors.
American Century Investments
Among the first items the U.S. Congress is likely to deal with after the midterm election are the federal budget deficit and taxes. The accepted wisdom is that markets prefer the more incremental change based on political compromise brought by divided governments. However, median returns data looking back 60 years do not provide any strong support for this. Indeed, if a divided government leads to intransigence and gridlock, then it will take another two years and the next general election before key issues can be addressed.
Results 51–100 of 134 found.