The Fed’s signals that rate increases could soon come seem to fall on deaf ears. U.S. stocks continue to climb as bond yields decline. Although recent data reflect accelerating economic growth, which is necessary to justify frothy valuations, structural challenges and unclear policy outcomes remain. Caveat emptor.
Why worry about paying a premium for bonds? While cash flows may differ, income from premium and par bonds is equivalent, all other variables being equal. Purchase premiums aren’t lost when the bonds mature.
Demonetization, "Operation Clean Money," central bank surprises, and a populist budget that also exhibits fiscal consolidation? Negative foreign investor equity flows, and India's stock market is up?
Market gains since Trump’s election are starting to look fragile, undercut by friction between the U.S. president’s pro-growth reform proposals and his mercantilist and anti-immigration stances.
While bank loans offer protection from rising risk-free rates, they’re callable and frequently redeemed by the issuer in an improving credit environment, when they generally underperform high-yield bonds. But in a deteriorating environment, they drop about the same as high-yield bonds. They can overcome that negative skew, but only rarely.
A painful selloff in the muni bond market represents a partial correction from overvalued levels, paving the way for more attractively priced bonds. A laddered bond strategy can also go a long way to mitigate the pain.
Oil prices jumped sharply in the wake of OPEC’s pact to cut production, but the market might wait to see implementation of the output reduction. OPEC’s quota compliance history and current market supply and demand dynamics don’t necessarily support sharp climbs in oil prices.
Prime Minister Modi’s politically risky push to tamp down India’s outsized underground economy by pulling the largest rupee bills out of circulation is causing real disruption among consumers and businesses.
Emerging market assets have come under heavy pressure, particularly in Mexico and China, which have also sagged under the specter of rising U.S. trade protectionism. But rather than focus on Trump’s campaign talk, watch his actions.
Over the past couple of years, we added some high-quality floating-rate securities to the portfolios, believing the Federal Reserve would increase short-end rates at some point as both real gross domestic product (GDP) growth and inflation were low but notably positive.
It was an interesting quarter in the fixed income markets and the municipal markets in particular, ranging from "Brexit" in the United Kingdom to the Federal Reserve Board (Fed) threatening to raise the Fed funds rate yet again (sounding like "Chicken Little").
What’s driving developing country stocks? What’s needed to support their current valuation multiples?
Colombian voters narrowly defeated a government-sponsored peace accord with FARC insurgents, surprising pollsters and dashing President Juan Manuel Santos’ desire to end the five-decade conflict and cash in on a peace dividend.
