Crowd sizes, Alternative Facts, The Bee Movie, Madonna, Tax Returns, Twitter, Facebook, 24-hour news channels and Saturday Night Live. If you enjoy political entertainment, then now is your time.
The US credit cycle is entering its ninth year. That doesn’t mean it will end tomorrow. But it will end—and possibly sooner than markets think. Fortunately, there are ways to de-risk and maintain exposure to high-income assets.
Over the past decade there has been a very strong relationship between US 10-year treasury yields and the gold/copper ratio. As the gold/copper ratio increases (i.e. gold becomes more expensive relative to copper), yields have fallen to the tune of an -85% correlation.
Greetings this New Year from our new office facilities in Westborough, MA. We hope you will find time to stop in if you are in the area!
The Ten Surprises of 2017 have a generally constructive tone. President Trump campaigned promising significant change to the American people. He raised expectations, and that’s why he won.
Investors would have done well in 2016 to heed the words of Heraclitus, paraphrased: “Expect the unexpected.” Brexit and the U.S. election results were two glaring examples of the unexpected becoming reality.
Donald Trump’s policies appear almost certain to contribute to volatility in Asian markets during 2017. For active fixed-income investors who understand the dynamics of bonds and currencies in the region, this creates opportunities.
Take Warren Buffett. He backed Hillary Clinton throughout the primaries and general election. And yet just yesterday, on the eve of Trump’s inauguration, he said he supported the new president and his cabinet “overwhelmingly,” adding that he’s confident America “will work fine under Donald Trump.”
Although continued political uncertainty looks set to dominate the investment agenda for 2017, much as it did in 2016, David Zahn, head of European Fixed Income, Franklin Templeton Fixed Income Group, feels investors need to take heed of other themes that may be bubbling under the surface in the year ahead.
On 11/4/16, the 65-day correlation between between the S&P 500 and US 10-year treasury yields was as negative as it had been at anytime since June 2007. The 65-day rolling correlation was -30% compared to a 73% correlation that had occurred just a few months earlier in June.
Part of our early January ritual is to read a number of market and economic projections for the upcoming year. And although they are interesting and (generally) thoughtful, to be frank, the articles are basically all the same…
European banks seem to be on an upward trajectory – although improvements are likely to come at a slow pace and with some risks.
Global equities are nearly 25% higher than in February 2016. A tailwind for this rally has been the bearish positioning of investors, with fund managers persistently shunning equities in exchange for holding cash. That's no longer the case. Optimism towards the economy has surged to a 2-year high.
Fearing rising rates, some municipal investors have sought protection in passive laddered portfolios. The strategy’s seeming simplicity packs a lot of allure—but also hidden risks.
There is much we don't know about how the Trump presidency will play out. Will the Wall get built? Who will pay for it? Will it have at least some fencing? Will repeal and replace happen at exactly the same time? Will Trump throw a ceremonial switch? Will there be a Trump National Golf Course in Sochi? It's anyone's guess.
We would like to take this opportunity to extend our warmest Holiday Wishes to all of our clients and their advisers. 2016 certainly was a year for the history books – from the Brexit surprise to the November surprise; the year certainly was not one that improved the reputation of pollsters!
While Chinese growth looks stable into early 2017, a more marked slowdown by the second quarter appears inevitable.
Higher interest rates, a stronger dollar and Donald Trump: three reasons to avoid emerging-market (EM) debt? Not necessarily. Rising rates seem to be signaling faster growth, and that’s good news for many EM bonds and currencies.
Time for the new White House and Congress to put pen to paper. While the equity markets have sustained their high levels, intra-day volatility in currencies, bonds and equities have surged as those markets attempt to react to every rumor and tweet out of Washington and Trump Tower.
I hate making predictions. I got the tech wreak and sub-prime right, but was far too early on those predictions.
By now, you have likely heard something, either directly or indirectly, about “The Great Rotation” from bonds into stocks.
Don’t get too far ahead of yourself and drink the cool aid that bonds will underperform. Investor fears of higher interest rates have caused volatility, which we believe presents opportunities in the fixed income markets. Global central banks continue to intervene in the markets in such a way that natural market mechanisms cannot function properly.
You’re in denial if you believe that U.S. stocks are fairly valued, the Eurozone does not face a crisis or a strong dollar will support stability in the global economy. Those themes were presented by Albert Edwards and his fellow speakers at the annual investment conference sponsored by Societe Generale.
I gave you my own thoughts last week (see “Skeptically Optimistic”). Today we’ll review several other forecasts from people who deserve your attention. Of necessity, I must leave out some good ones, but I think the ones I cover will give you plenty of useful information.
Look at what President-elect Donald Trump’s pledge to lower taxes and slash regulations is doing to business optimism here in the U.S. Last month, the Index of Small Business Optimism soared a phenomenal 7.4 points to 105.8, its highest reading since 2004. The National Federation of Independent Business (NFIB), which conducts the survey, reported that attitudes toward capital spending and job creation in particular surprised to the upside. Research firm Evercore ISI called it a “blowout report,” and I have to agree.
It is somewhat hard to believe but oil prices are up nearly 90% over the past year. The past two times oil prices have increased this much year-over-year, US 10-year bonds rallied quite significantly. In 2008, oil was up over 100% in July and bond yields were hovering just over 4%.
As a result of the post-election sell-off in bonds, treasury inflation-protected securities recorded a loss of 3.0% in the 2016 fourth quarter, their worst performance since the 2013 second quarter.
Rising volatility and yields. Toppy valuations. Global policy uncertainty. To handle these bumps in the road, investors need to build a better return path focused on strong up/down capture. Further, we see seven key themes affecting that path ahead.
The latest Commitment of Traders report (as of last Friday) highlights some extreme levels of speculation in several different assets.
The search for investment portfolio returns is not going to get any easier in 2017 against a backdrop of record U.S. equity prices, narrow credit spreads and low bond yields.
Allianz Global Investor’s Capital Markets and Thematic Research team and analyst Ann-Katrin Petersen say that even though the year ahead will continue to be challenged by uncertainties, market disruptions may prove fleeting—and cooler heads will likely prevail.
Investors will confront excessive debt, high P/E levels and political uncertainty as they enter the Trump presidential era. In response, according to Jeffrey Gundlach, U.S.-centric portfolios should diversify globally.
Longer-term bond yields are near their highs for this cycle, while the environment for riskier assets like high-yield bonds, bank loans and stocks remains positive.
2016 was a rather boring year for the markets. That is until the surprising November election results left Americans thinking “Now What?”
As the markets close the books on another tumultuous year, Neil Dwane, Global Strategist for Allianz Global Investors, says investors should keep watch on the rise of populist politics, China’s re-emergence as a global growth engine and a renewed focus on government spending as interest rates remain low.
Paul O’Connor, Head of Multi-Asset, reviews 2016’s lessons, and details the key themes that investors should prepare for in 2017. He explains which areas of the market look most and least appealing from a cross-asset perspective.
When many people hear the word “convertible,” carefree driving, sunny roads and wind-blown hair probably come to mind. Franklin Equity Group Portfolio Manager Alan Muschott thinks of convertibles as something entirely different.
Chinese local interest rates rose substantially late last year, and many bond offerings have been canceled, creating financial strain for some Chinese companies.
I traveled once to Africa, as you might have guessed by now, and it's been a part of me ever since. Being perhaps the cradle of civilization, if not life itself, Africa casts an eerie glow over the entire history and, indeed, meaning of existence.
Markets were in reflation mode during the final weeks of 2016, sending the 10-year US Treasury yield to its highest level in more than two years. While economic indicators have shown modest improvement, most of the rise in yields is built on lofty expectations. In the coming years, we think a strengthening macro backdrop may support modestly higher yields.
The last few days of 2016 have receded amidst continued pain for Asia's markets. Matthews Asia CIO Robert Horrocks, PhD, reflects on the year that began with a rally in Asia's equity and fixed income markets, but it ended in a slump.
The article is very long. It is long for two reasons: first, it is was originally a two-part article that I folded into one; and second, I am dealing with the very complex topic of investing in today’s global economy. I wrote this article a year ago, and some themes like “be careful of MLPs” are not as relevant anymore, but overall it is still a very useful article for the world we face today.
Today, let’s take a look at the most current equity market valuations for they can tell us a great deal about future 7-year and 10-year annualized returns. We’ll also look at the bond market. Total U.S. credit market debt-to-GDP is nearly 355%. Global debt-to-GDP is 325%.
Instead of sitting on the sidelines in 2017, take a look at Europe’s corporate bond markets. They could prove a beacon of stability in an uncertain world.
Franklin Equity Group's Coleen Barbeau explains why last year’s election-driven volatility will likely continue—and may be more significant—in 2017.
Strong future growth is rooted in some basic dynamics in which Asia Pacific excels.
US equities are starting the year at new all-time highs. The rally is supported by healthy breadth and a relatively solid economic foundation. The biggest watchout is volatility, which has fallen to an extreme. A mean reversion in volatility is odds-on and that is normally unfavorable, short term, for equities.
I find it curious that many in the financial media continue to have a bias against gold, even though it generated better returns in 2016 than 10-year Treasuries and the U.S. dollar, which performed half as well. And when it was up as much as 28 percent in the summer, they still didn’t have anything positive to say, arguing it had gone up too much.
Factors ranging from China’s evolving economy to the rise of nationalism combined to make 2016 a year that will not be quickly forgotten.
