The US Federal Reserve decided against an official short-term rate hike at this week’s meeting—hardly a surprise. But US Treasury yields continue to climb in 2018, and not all the explanations are good news.
The price of gold has been feeling the pressure lately from a stronger U.S. dollar, which is at a four-month high, and rising Treasury yields. Nevertheless, the yellow metal eked out a positive March quarter, returning close to 1.3 percent, while the S&P 500 Index posted its first negative quarter since 2015.
Stocks slide on rising rates and yield curve inversion concerns, but a recession doesn't look likely, judging by other economic data and the high-yield bond market.
Spring is taking its sweet time arriving on the East Coast of the US – much of April was cold and wet. There were several “head fakes” – days when the temperatures rose and the rains dried up. But just when it seemed safe to put away the winter coat, another cold front would blow through and the cycle would start again.
As we move away from the financial crisis and as policies normalize, it is a good time to take a look at what the removal of those policies might mean. After all, many of the actions taken in the aftermath of the crisis were explicitly designed to do certain things. If those actions were successful, then presumably their reversal would have the opposite effect.
“A long time ago in a galaxy far far away” I was running three separate departments at then Richmond-based Wheat, First Securities. Subsequently, Tom Dorsey and Watson Wright decided to leave Wheat, First and form the now legendary firm of Dorsey Wright. When they left, that department fell under my management.
The economic calendar is huge, including the most important monthly data and plenty of earnings reports. With a Fed meeting on the calendar and Tuesday’s decline attributed to the ten-year note touching 3%, the punditry will be asking: Will economic data drive interest rates higher?
For most of the post-crisis period, defensive stocks have been expensive. Russ suggests that may have changed.
A recap of the overall economy and stock and bond markets during the first quarter of the year. It also gives examples of historical data advisors and investors should consider when determining their investment strategies for the remainder of the year.
We believe The New Neutral of lower-for-longer equilibrium policy rates remains a valid anchor over the medium term. The key drivers of low equilibrium rates – including demographic trends and the high level of leverage in the global economy – have not substantially changed since the financial crisis.
As the Federal Reserve (Fed) tightens monetary policy further, we expect to see default rates higher next year. Loan recovery rates averaged 70 percent between 1990 and 2017 as a result of their secured status and seniority in the capital structure. Senior secured bond recovery rates averaged 58 percent over the same period, while senior unsecured bond recovery rates averaged 43 percent. We are concerned about distressed exchanges as the risk of re-default is high. About 7 percent of high-yield corporate bond issuers have defaulted in the past.
The 3% U.S. 10-year government bond yield isn’t the right yield to focus on. Richard explains why.
Just a few weeks ago, the Pouting Pundits of Pessimism were freaked out over the potential for the yield curve to invert. They've now completely reversed course and are freaked out over a 3% 10-year Treasury note yield.
US equities have been in a consolidation phase for most of 2018. In the past, these consolidation periods have lasted a half year or longer - so this might continue into summer - although some measures of sentiment are already near a washout. New highs are very likely to still lie ahead in 2018.
After years of declarations that the bull market in bonds is over and the rise in interest rates was imminent, are we finally there? The move in rates on 10 year Treasuries again prompted this question in the first quarter; rates rose by over 50 basis points during the quarter, before settling in to a more modest 30 basis point increase.
In short, there is not enough data to have me predict a recession and the consequent bear market. But there’s enough data bubbling up all around me that it makes me very nervous, and I am paying close attention. You should be, too.
Headwinds for stocks have risen but tailwinds also exist, resulting in a more tumultuous environment. We believe there are enough positives to keep the bull market going but gains are likely to be slower in coming, volatility is likely to remain elevated and discipline to a long-term plan will be crucial. Avoid overreacting to the barrage of news and focus on the items that could change the actual fundamentals of the economy.
This week, the economics team takes a look at NAFTA, past and present.
I’m bullish, but I don’t expect bitcoin to test $20,000 again in the short term, especially before July. That’s when G20 finance ministers are scheduled to present their recommendations on how cryptocurrencies should be regulated.
The last time we wrote about the US dollar London lnterbank Offered Rate (LIBOR) was in 2016, when the spread between LIBOR and the Overnight Indexed Swap (OIS) rate increased due to market dislocations leading up to US money market fund reform. Now in early 2018, we have seen LIBOR rates rise and LIBOR-OIS spreads widen again, causing us to ask the same question — what’s up with LIBOR?
We are growing accustomed to wide daily swings in the Standard & Poor’s 500 and the Dow Jones Industrial Average. Triple-digit moves in the latter and double-digit changes in the former are no longer reasons for elation or alarm. The volatility can result from an unexpected economic report or a tweet from the White House.
This is the fifth of a five-part series presenting 50 dividend growth stocks that I have screened for current fair value. With this article, I will be covering 10 additional dividend growth research candidates with moderate to higher yields in addition to the initial 40 that I presented...
Advisors face two problems in today’s market: how to find yield in a low interest rate environment and how to protect against rising rates. Join experts from XA Investments and Octagon Credit Investors and learn ways to position clients’ portfolios to take advantage of rising rates. We’ll discuss the benefits of floating-rate loans and collateralized loan obligations (CLOs) and how best to access them.
Participants will learn about:
There’s new rumblings about an inverting yield curve ahead. Is it time to panic? Time to stick our heads in the sand? Or time to think sensibly?
In their second-quarter (Q2) 2018 outlook, K2 Advisors’ Research and Portfolio Construction teams share their views on why investors should not fear the return of market volatility—and why it may unlock opportunities for active managers. We believe offering these insights will help investors better understand the rationale for owning retail mutual funds that invest in hedge strategies.
Written in 1606, Shakespeare’s words are just as relevant today. Tweets and eye-catching headlines dominate the news cycle and many conversations, but when you parse them for impactful content, you realize it’s mostly just white noise.
The Tax Cuts and Jobs Act of 2017 included a number of changes that have directly impacted the $3.7 trillion municipal bond market.
With sky-high valuations in the US stock market, and what we believe is a tech bubble that has dangerous implications for other areas of the market, we suggest four actions investors can take now to avoid the inevitable bursting of the bubble, and which will likely benefit their portfolios’ long-term performance potential.
The yield curve has flattened significantly recently and has elicited headlines of impending doom, heightened recession risk and investor consternation…is the worry overdone?
The Bank of England has had to navigate a difficult set of circumstances in its attempts to raise interest rates. As far back as 2014, Governor Mark Carney suggested that rate rises could come “sooner than markets currently expect,” only for those aspirations to be dashed. Indeed, the next move in interest rates turned out to be a rate cut, in the aftermath of the June 2016 Brexit vote.
The tax efficiency of the Value factor can be improved by reducing exposure to dividend-yielding stocks. Improving the tax efficiency reduces the performance in Europe and Japan, but not in the US. Reducing turnover can be considered for minimising capital gains and stamp duty taxes.
The investment case for commodities, gold and energy is more compelling than at any other time in recent memory.
Consumer spending and business fixed investment remained strong, pointing to continued domestic economic growth. Notably, business fixed investment growth, represented by private domestic investment, accelerated to 5.4% year-over-year growth in the fourth quarter of 2017, from a low of 0.71% in the third quarter of 2016.
This is the fourth of a five-part series presenting 50 dividend growth stocks that I have screened for current fair value. With this article, I will be covering 10 additional dividend growth research candidates with moderate to higher yields...
In a storm, you want to be able to reach higher ground. Recent market volatility – sparked by concerns over interest rates, inflation, global trade, the tech sector and more – has many investors shifting toward more defensive portfolio positions.
Nearly nine years into the current economic expansion Federal Reserve policy actions appear to be benign, as even after six increases, the federal funds rate remains less than 2%. Changes in the reserve, monetary and credit aggregates, which have always been the most important Fed levers both theoretically and empirically, indicate however that central bank policy has turned highly restrictive.
Many investors who thought worrying about inflation was “so 20th century” may now be seeing reasons to reconsider: The business cycle in the U.S. is mature, output gaps have closed, trade frictions are mounting and populism is on the rise.
These are two of the most important paragraphs we have encountered in more than 47 years of studying markets. DO NOT read them just once. Go off to a quiet spot that invites contemplation and READ THEM SEVERAL TIMES. Then reflect on all of the mistakes you have made in trading and investing.
TIPS declined 1.1% on average in the 2018 first quarter, less than the 1.6% decline in comparable maturity straight Treasurys. The average breakeven spread widened to 222 bp from 184 bp at the end of 2017. Short-maturity TIPS delivered a positive return, as investors sought a haven from rising interest rates and inflation.
2018 began much as 2017 ended, with steadily rising equity markets, low interest rates and burgeoning market optimism. Indeed, investors were increasingly convinced that the lowest stock and bond market volatility since 1965 was set to continue in 2018. Who could blame them?
This is the third of a five-part series presenting 50 dividend growth stocks that I have screened for current fair value. With this article I will be covering 10 additional dividend growth research candidates with moderate to higher yields in addition to the initial 20 that I presented...
Equities experienced heightened volatility during the first quarter of 2018, with the S&P 500 Index surging 7.55% from Dec. 31 2017, through Jan. 26, 2018, before dropping nearly 8% through quarter-end.
You’ve no doubt heard that everything’s bigger in Texas. That’s more than just a trite expression, and I’m not just saying that because Texas is home to U.S. Global Investors.
There have been some violent market moves recently, but it’s important for investors to keep things in perspective.
Northern Trust’s economic team recaps recent economic developments and shares our monthly outlook for economic growth, inflation, employment and interest rates in the United States.
Recent weak data emanating from the Eurozone has been weighing on German Bund yields. The significant drop in the Eurozone Citigroup Economic Surprise Index (CESI) has pressured German Bund yields lower.
Northern Trust’s Economic Research team shares its quarterly perspective on the growth prospects and challenges ahead for the U.S., U.K., Eurozone, China, and Japan.
A review of last month’s market-moving events across countries and asset classes.
This is the second of a five-part series presenting 50 dividend growth stocks that I have screened for current fair value. With this article I will be covering 10 additional dividend growth research candidates.
Should municipal bond investors be thinking about inflation protection? Without a doubt. But some inflation strategies are better than others. Choosing the right one could make all the difference.
