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The Dangers of Populist Protectionism
There is a real and rising risk that political reactions to today’s economic anxiety will be counterproductive to global prosperity.
Abruptly imposing trade barriers would be a wrenching shock to growth. It would also likely be met with retaliation from other trade partners.
We must watch developments on this front, seeking to position our capital towards problem-solving innovation, whether from technological advance or wise government stewardship.
Brexit: Boost or Bust?
A post-Brexit U.K. would arguably find trade with Europe harder and more costly, resulting in reduced economic growth.
Given that 75% of the U.K. market’s earnings base is outside the U.K. a weak currency may substantially offset the impact on investment and business confidence. Brexit is likely to have the biggest impact on banks, retailing, domestic earnings, other financials, insurance and property.
Who Cares If You're out of Ammo When You Only Fire Blanks?
Central banks have been aiming at growth and inflation targets for several years now without hitting them.
The real issue that investors should be worried about is whether government policy can match the boldness of monetary policy.
Without bold action on taxation, education, infrastructure, immigration and regulation, the policy actions of central banks will be the equivalent of firing blanks.
Do a Grouch a Favor
Investors should consider rebalancing their portfolios away from trying to maximize return in favor of maximizing consistency of the return.
I would also strongly favor strategies that aim to directly manage the volatility of a portfolio rather than the return.
While such strategies may result in lower projected returns, investors who employ them are more likely to achieve those returns because lower volatility goes hand in hand with staying invested.
Mitigating the Financial and Emotional Impact of Market Volatility
The era of low volatility may be over, but the need to pursue long-term financial goals is not.
Investors should consider both the financial and emotional impact of market volatility.
Positive returns are achievable in a volatile environment with the appropriate investment strategy.
5 Reasons to Consider Convertible Securities Today
Strong secular arguments for investing in convertible securities are now complemented by strong shorter-term arguments for investing in the asset class.
Most individual investors have little or no exposure to convertibles which have delivered decades of returns like those of the S&P 500 but with more current income and less volatility.
The focus on whether convertibles are especially attractive on a shorter-term basis can obscure the fact that the asset class has delivered for investors over time.
What the Bank of Japan's Negative-Rate Policy Means for Investors
The Bank of Japan’s new negative interest rate policy should benefit Japanese exporters and high-dividend stocks, but could have an adverse effect on banks.
We believe this policy should provide the Japanese economy and equity market with more positives than negatives.
We encourage investors to look for opportunities in high-quality Japanese companies to take advantage of the recent sell-off.
Does Market Volatility Bring Opportunities for High-Yield Bonds?
We believe the recent volatility and selloff in U.S. high yield offers an attractive relative investment opportunity as yield premiums have widened to provide appropriate compensation for today’s market risks.
The overall market still warrants a cautious approach for 2016, but we are constructive on much of the non-commodity-related high-yield opportunity set.
A disciplined credit selection process should serve investors well in taking advantage of high-yield opportunities.
Opportunities in the Evolving Non-Agency Mortgage Backed Security Market
The non-agency MBS market has evolved over the past few years with new sectors offering attractive investment opportunities.
Non-agency MBS have attractive fundamentals as consumers benefit from a stronger dollar and lower energy prices.
Flexible strategies with disciplined credit selection can help take advantage of the evolving non-agency RMBS investment landscape.
A Year of Transition for Financial Assets
The rocky start to the year corroborates our belief that 2015 marked a transition in the investment environment. We expect low returns and high volatility to continue in 2016.
Two factors that help explain market outcomes in 2015 remain relevant in 2016: 1) financial assets aren’t cheap and 2) Fed tightening eliminates one of the greatest tailwinds for financial markets.
Even in this new and challenging environment, we strongly believe that positive returns are achievable with the appropriate investment strategy. Active strategies deserve higher prominence.
A Fork in the Road
The arrival of disruptive innovation via new collective vehicles, pricing models, advice models and the unbundling of investment returns represents a fork in the road. Growth in demand for unbundled distribution and investments is being driven by generational preferences, technology and regulation. The future of the asset management industry belongs to those who are able to innovate and adapt.
The Good, the Bad and the Ugly
Interpreting equity declines as relatively “good”, “bad” or “ugly” provides context on how investors should react. We are experiencing a “good” correction as investors have focused on the level of sustainable economic growth and concluded that it is lower than they hoped. I am modestly positive about risk assets and believe investors will get significantly more impact by looking at sectors and individual securities rather than broad markets.
The Bond Market Is Raising a Cautionary Flag
The yield on the benchmark 10-year Treasury note won't rise much above 2.5% in 2016. Fed tightening cycles typically see curves flatten but long rates also typically rise, pricing in faster growth and inflation. The lack of conviction from the bond market that this will be the case represents an important cautionary flag.
Positioning Portfolios After Fed Rate Liftoff
With a positive backdrop for credit risk, we favor investment-grade corporate bonds and MBS, while some areas of high yield also present opportunities.
We believe a modest but positive duration stance remains appropriate, with 2016 likely to provide additional opportunities to buy longer dated bonds.
Currency risk presents some opportunity, but it is no longer as simple as expecting the U.S. dollar to appreciate versus all other currencies.
Inflation risk will likely increase next year as commodity prices ultimately bottom and wages perk up.
Did a Frozen Fund Lead Last Week's Outflows in High Yield?
The circumstances of two large leveraged debt funds do not mean that investors with exposure to traditional high-yield funds are subject to the same outcomes.
While we believe risk premiums should be higher for illiquidity and other risks, any technically-driven sell-off due to large redemptions could present a buying opportunity.
Last week’s events are further evidence that disciplined credit selection based on strong fundamental analysis will be a key driver of manager performance over the coming year.
Positioning Portfolios for the Next Tightening Cycle
Credit is trading at much more attractive spread levels relative to past hiking cycles, reinforcing our view that credit risk can perform well following liftoff.
Opportunities may present themselves to add duration risk further out the curve while the potential pullback in the dollar could create an opening to add currency risk.
Performance of inflation risk is mixed, with underperformance accelerating throughout the tightening cycle as the Fed lowers market expectations of future inflation.
What Investors Should Know About China's Stock Market Rally
China’s government owns a significant share of companies which they need to unwind, and this is going to hang over the stock market in the months and years to come.
We expect China’s economy will slow as it transforms from an industrial, manufacturing economy to a consumption-driven, service-focused market.
Companies that can take advantage of economic and demographic changes while contending with environmental and social issues will survive and flourish.
The U.S. Consumer: What Are Their Latest Spending Trends?
Consumers are increasingly spending on experiences over things, while spending on durables continues to take share from non-durables.
Traditional retailers are likely to remain under pressure for the foreseeable future although there are several categories which are bucking the trend.
Given these pronounced shifts in consumer discretionary spend, it is increasingly important to identify categories and brands that are poised to outperform.
The Case for Active Equity Management
The growth of passively managed funds adds to market inefficiency by increasing the prevalence of price indiscriminate buyers and sellers. This can create inefficiencies that active managers can exploit. Weakening global liquidity means that there will no longer be a rising tide of liquidity that lifts all boats, and dispersions in the returns offered by individual stocks are likely to increase.
A December Rate Hike Would Not Be the Fed's First Act of Tightening
Investors preparing for the shock on risk-on assets as a result of Fed tightening may be surprised to realize that they have already been feeling these shocks.
The impact of a single 25 basis point hike as a part of a slow, years-long rate-rise cycle will likely be modest compared to the impact of the end of QE3.
Now that panic has retreated following August and September’s volatility, the view that a rate hike is not a death knell for portfolios, whether risky or not, is emerging once again.
A Rare Do-Over for Equity Investors?
While the market may still rally to new highs, the late August free fall in stock prices and spike in volatility served as a wake-up call for investors.
In the past ten weeks, major equity indices have recovered virtually all the losses experienced during the August swoon.
The recent rally gives investors a second opportunity to position their portfolio for an important inflection point in monetary policy as the Fed likely starts raising interest rates.
It's Groundhog Day for the Markets
The likelihood of subdued economic growth means that interest rates will be lower for longer.
There will no longer be a rising tide of U.S.-led QE that lifts all boats.
We think that a selective approach in equities will pay off as investors focus more on valuations and fundamentals.
Do Growth Stocks Still Have Room to Run?
While growth and value stocks have historically traded off leadership roles, we do not think that a decisive shift towards value is in the works.
We think that investing in competitively advantaged innovators is extremely important and that the best defense against potentially disruptive changes is to invest in them.
While we are always interested in value investing opportunities, we see the overall picture as continuing to favor truly innovative growth.
Bank Is not a Four-Letter Word
Since the Great Recession, banks have been a dirty word used by politicians and other pundits. However, banks play an important role in the economy.
The pace of interest rate normalization will be slow and long, which should lead to an acceleration of credit, which will create a cycle of economic expansion.
Our investment in commercial banks has been a welcome source of alpha, and we continue to be optimistic on the forward fundamentals for the U.S. economy and U.S. lenders.
Income and the Interest Rate Game
An investment strategy based purely on guessing where interest rates are headed is destined to miss the mark.
We still expect the Fed to raise rates soon (but probably not in October) and we think longer term rates should drift higher (but we wouldn’t want to bet the farm on that).
Investors should focus on areas of the bond market that offer attractive income relative to the risk, and retain the flexibility to adjust that positioning as the market evolves.
Alternate Payment Models: Why the Healthcare Industry Will Never Look the Same
The Center for Medicare Services has launched several pilot projects that explore alternative payment models with the goal of reducing healthcare cost while improving quality.
CMS is already moving towards requiring bundled payments for certain procedures. These programs will move from pilots and voluntary programs to mandatory payment schemes in the future.
Hospitals, doctor groups, and post-acute care providers are scrambling to position themselves for this new world, and investors must be aware that there will be clear winners and losers.
Third-Quarter Earnings Report: Industrial Worries
Lower energy prices are not a noticeable tailwind for industrial companies close to contraction in the North American energy sector. It is hard to picture enough good news this quarter to cause a significant change in sentiment for stocks in the industrial sector. The rest of this year may be tough in industrials, and 2016 may not be that great either, but I think we can avoid more dire scenarios.
Emerging Market Debt: An End to the Agony?
Capitulation by many EMD investors has created opportunities in many of the more resilient countries. We favor countries moving down the reform path and where there is significant impetus to reign in excessive government spending. Valuations have reached the extremes that allow a selective approach to EM to now represent a key part of an income-oriented portfolio.
Is the Biotech Pullback a Buying Opportunity?
Fundamentally, the outlook for biotech is as strong as ever. Drug price controls are unlikely to happen for the next decade despite the political rhetoric. Political pressure combined with crowded quant positions and fund liquidations have created buying opportunities in biotech.
Q3 — a Stark Reminder Why Portfolio Resilience Matters
Now is a good time to review strategies for improving overall portfolio efficiency and reducing or truncating downside risk.
There are several strategies that are particularly well-suited for truncating downside risk.
The third quarter reminds us that thinking about stability and resilience can be just as important as thinking about opportunity and profit.
Innovation and Investment in “short-termist” America
The aggregate decision-making around capital allocation would appear to continue to support a strong global competitive position for U.S. companies.
Leading American companies are making long-term investments and investors are giving the most compelling of them a lot of credit for those long-term choices.
While many continue to underestimate the power of American innovative strengths, the speed of disruptive new developments will only increase the cost to those who do so.
Corporate Earnings Outlook: Why Are Expectations so Low?
Corporate reporting for the second calendar quarter started last week with a lead group of early reporters. Looking forward to the body of earnings season, I think results are likely to be, on average, a bit soft. And despite valuations that are on the high side relative to history, it just doesn’t seem that expectations are that high. In many industries, investors seem willing to accept that better results are shimmering out in the future, provided management teams can make a good case for what they are doing to position the company for that future.
The Greek Crisis Takes a New Turn
Talks between Greece and its creditors collapsed over the weekend. The Greek government has called a referendum on July 5 to accept or reject its creditors' terms — a move almost universally considered to be a poll on the continued membership of the euro area. The timing of this latest turn may have taken many by surprise, but like watching a slow-motion train wreck, few could say they didn’t see it coming.
Results 51–83
of 83 found.
