More and more investors are globalizing their bond portfolios these days—with good reason. But when it comes to reducing risk, active management is essential. The French presidential election is just one reason.
Portfolio manager Ken Fincher of First Trust Advisors shares a perspective on the potential impact of rising interest rates on closed-end fund investors.
As some market worries have been put to rest, there is a growing appetite for new ones. Pundits who say that things look OK are not very exciting. Last week we saw a shift in attention. Despite healthy earnings and good economic data.
One way to use information on stock valuations and interest rates in a systematic way is to estimate the break-even level of valuation that would have to exist at given points in the future, in order for stocks to outperform or underperform bonds over various horizons. Investors presently face a dismal menu of expected returns regardless of their choice. Indeed, in order for expected S&P 500 total returns to outperform even the lowly return on Treasury bonds in the years ahead, investors now require market valuations to remain above historical norms for the next 22 years.The good news is that this menu is likely to improve substantially over the completion of the current market cycle. The problem is that current valuation extremes present a hostile combination of weak prospective return and steep risk.
There is one problem that is very definitely coming our way that I really don’t think we can Muddle Through and where even the middle-of-the-road scenarios are terrible, and that’s the public pension crisis. I really see no way it can end well. It’s going to hurt just about everyone.
Trump’s 100th day arrives next Sunday, April 29, and it would be disingenuous to describe his tenure so far as smooth sailing. He’s faced a number of significant setbacks and distractions, including federal judges’ smackdown of his two travel bans, a failure to repeal and replace Obamacare and an ongoing investigation into his administration’s possible collusion with the Russian government in the months leading up to the November election.
Senior Quantitative Investment Strategy Analyst Kara Ng reviews key economic indicators in the U.S. and if a potential recession in the economy is still unlikely.
Franklin Templeton Fixed Income Group talks monetary policy, European politics in the April Global Economic Perspective.
“Not see the forest for the trees” is an idiom derived from British English that describes someone who is so focused on the minutiae that they miss the larger picture.
When the first round of voting kicks off in the French presidential election on 23 April, the outcome will determine not only France’s political future, but whether the EU moves closer to unity in this critical “super cycle” election year.
When assessing a portfolio and determining their asset class mix, investors often allocate large portion to equities as this is believed to have a much better longer-term investment return profile than “bonds,” while “bonds” are considered less risky and offer a diversification benefit to a portfolio.
Global equities rally supported by strengthening macroeconomic data.
Investors appear to be taking another look at the risks they are willing to take, while also considering whether the reflation story may not develop as hoped. Reflation is the process of getting economic growth and price broadly back to pre-recession levels. While progress has been made, growth is still not accelerating.
A review of last month’s market-moving events across countries and asset classes.
With inflationary pressures under control and external balances improving, many emerging-market (EM) countries are working on the next item on their to-do lists: reigning in fiscal deficits. That’s good news for emerging equities, dollar-denominated bonds and local-currency debt.
A new study from Research Affiliates finds U.S. equities “currently overvalued but not as much as suggested by the historical averages.”
Last week, we began our retrospective on the EU. This week we will examine the post-Cold War expansion of the EU, including a discussion of the creation of the euro and the Eurozone. With this background, we will analyze the difficulties the EU has faced in dealing with the problems caused by the 2008 Financial Crisis.
Sluggish growth and aggressive central bank actions following the Global Financial Crisis pushed interest rates down to unprecedented levels, even negative outside the US, for longer than many would have expected.
Many years ago I created an economic investment dashboard of sorts to help me do my best to keep my head screwed on straight. If you subscribe to a handful of research services, you know what I mean. For every 10 bulls, there are 10 bears.
Portfolio manager Ken Fincher of First Trust Advisors provides an update on closed-end fund discount trends in the first quarter of 2017.
Invesco Fixed Income shares its views of rates around the world
Since the early 1980s, bond investors have benefitted from declining interest rates. But we may be turning to a future of rising rates and clients suffering bond losses. Advisors need to be prepared both in terms of investment strategy recommendations and communication with clients.
Today, in what will be the first of at least two and possibly more letters focusing on pensions, we’ll begin to examine that angst in more detail. The mounting problems of US and European pension systems are massive on a scale that is nearly incomprehensible.
One of the benefits of historically-informed investing is that it allows various investment perspectives to be evaluated from the standpoint of evidence rather than verbal argument. That’s particularly important during periods like today, when much of financial commentary on Wall Street can be filed into a folder labeled “it’s hard to argue with your logic, if only your facts were actually true.”
As if you need more proof that inflation is finally starting to pick up, lumber prices rose to a 12-year high this week, supported mainly by expectations that steep duties will soon be levied on cheap softwood imports from Canada. Lumber futures rose to nearly $415 per thousand board feet on Monday, a level unseen since March 2005, soon after homeownership peaked here in the U.S.
After testing and bouncing off the important 2.32% level four times so far in 2017, the US 10-year bond finally broke below that important threshold. The phenomenon has gone basically unnoticed by the financial commentators, but it occurs just as US economic data begins to wane following the bounce that started in the second half of 2016.
A synchronized pickup in global economic activity has lifted the spirits of businesses, consumers and investors worldwide. Though many equity markets are near 52-week highs and credit spreads are near multi-year lows, we still believe the US credit cycle has time to advance in its later stage.
The housing market evokes a strong, and often emotional, reaction. This is usually because vested interests (owners, investors, speculators, politicians, lenders, real estate agents and others) can’t bear to think of the consequences of a decline in house prices. Politicians constantly talk about making housing more “affordable” but, by definition, this means lower prices.
Amid the political uncertainty in Europe prompted by upcoming elections and the start of Brexit negotiations, another story is quietly playing out, involving improved economic and corporate conditions.
The first quarter of 2017 was a profitable one for many strategic domestic and global equity investors. All major domestic large cap indices are up for the year: S&P 500 is 5.53%, Dow 4.56%, and NASDAQ 9.82%. On the other hand, domestic small cap underperformed with the Russell 2000 gaining 2.12%.
While it might sound obvious, we find it important to remember that knowing about the past only helps you place bets on the future to the extent that the future is like the past.
We examine the potential effects of Trump’s tax and infrastructure proposals on the muni market.
Are you ready for some real news? How about corporate earnings? While there is some economic data on tap, the Q1 earnings season starts in earnest this week. With questions about economic strength, the dollar and the Fed in mind, pundits will be looking for fresh data.
My firm recently approved a new alternative investment, one that until recently was only available through hedge funds, the Stone Ridge Reinsurance Risk Premium Interval Fund (SRRIX).
Fresh purchasing manager’s index (PMI) readings for the month of March were also released, showing continued manufacturing sector expansion in the world’s largest economies, including the U.S., China and the eurozone. All of Zurich was under construction, it seemed, with cranes filling the skyline in every direction. And when I flew back into San Antonio, sections of the international airport were also under heavy construction. This all reflects strong local and national economic growth in Switzerland and the U.S.
US indices made their all-time high in early March; aside from the Nasdaq, which made new highs this week, these indices have since moved sideways. SPX has alternated up and down 5 weeks in a row, producing little net gain. Seasonality is particularly strong in April, so a fuller retest of the March highs might still be ahead this month. And indications that 2017 will be a good year for equities continue to add up. But there is a notable set up in place for the first correction since November to trigger. This week is likely to be pivotal.
Over the last decade, a combination of unprecedented global financial integration and unconventional monetary policy in global financial centers created new challenges for central banks in emerging markets (EM).
The way in which the Fed normalizes its balance sheet will have important implications for markets.
The world’s major economies have performed quite well in recent months despite the influence of political and policy upheaval. Brexit and the outcome of the U.S. election have yet to produce the negative outcomes some had feared.
Headline CPI rose from 2.5% to 2.74% last month, fueling speculation about higher interest rates. But inflation readings will be lower in the next few months, according to Jeffrey Gundlach.
Inflation may be starting to develop in the U.S., which has significant implications for the High Yield bond market. As inflation takes hold, the Fed’s normal response is to raise policy interest rates to prevent inflation from spiking higher. So what does a period of rising rates mean for High Yield bonds?
Co-CIO Francis Gannon analyzes the cross-currents and reversals in 1Q17 and details why the small-cap rally has room to run.
United Parcel Service Inc. (UPS) currently offers a dividend yield in excess of 3%. Moreover, it is also available at a valuation that is slightly below historical norms. The company has provided a stable and growing dividend since it went public in 1999.
Key points from Russell Investments’ latest Global Market Outlook: See what their strategists believe is ahead for global markets in 2017.
Without a surge in monetary growth, fiscal policy alone doesn’t indicate inflation.
Is time segmentation a superior investment strategy for retirees relative to total-return investing?
It’s hard to imagine a more challenging decade for income investors than the past 10 years. It was bookended by the great financial crisis and the surge in populist politics that led to the election of Donald Trump as U.S. President.
I’m going to try to tie two related themes together today. The first, and I have to admit I was surprised when I saw the research, is the incredible shrinking universe of stocks. Think corporate share buybacks, mergers and acquisitions and fewer companies going public. The second is the popularity of index investment products...
