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Have Commodities Reached an Inflection Point?
This week the Federal Reserve announced that it would delay the interest rate liftoff yet again, but while everyone seems concerned about nominal rates—the federal funds rate, in this case—real rates have already risen about 5 percent since August 2011. This “invisible” rate hike is much more impactful to commodity prices and emerging markets than a nominal rate hike, which is simply the “tip of the iceberg.”
Currency Risk, still an Afterthought?
by Anton An of Matthews Asia,
Foreign exchange concerns were once an afterthought for equity investors. But the recent slowdown in emerging markets, and the potential for the U.S. Federal Reserve to raise interest rates, makes it even more critical for investors to examine currency exposure throughout corporate financial statements.
Emerging Markets Equity Commentary: September 2015
by Team of Thomas White International,
Emerging market equity prices declined further in September, as fears about slower global economic growth persisted. External trade data from China was weaker than expected and accentuated investor concerns that the world’s second largest economy could miss current growth targets. Nevertheless, retail sales in China continued to expand at a healthy pace in August as the central bank’s interest rate cuts and other policy measures lifted domestic consumer sentiment.
It's Darkest Before the Dawn – but Is the Time Now 1am or 5am?
It has been a pretty brutal summer for the energy markets. Brent oil fell from $65 in May to below $40, and the MSCI World Energy Index was down around 25% over the same period, leaving energy as the worst performing sector year-to-date and the most out-of-favour among all the portfolio manager surveys that we see. Long-dated Brent oil has also fallen; having started the year at $78 and traded in a fairly tight $75-$80 range until the end of June, it fell to a low point of just over $60, over 40% off its highs last year.
4Q 2015 Outlook: Key Issues Have Not Changed Much This Year
As the final quarter of 2015 begins, we are reminded of several topics of focus from the start of the year: concerns that global central bankers are stuck with their current monetary policies because the global economy now depends on them; market acceptance that higher U.S. interest rates are inevitable, even if they rise only slightly; and favorable prospects for U.S. consumers, who benefit from a stronger labor market and lower energy prices. If the topics sound familiar now, it is because little has changed in these areas while global risks have increased for several reasons.
The Obama Doctrine: Moneyball America
Over the past three years, we have witnessed what appears to be a steady erosion of American power. In this report, we will examine President Obama’s foreign policy, using the construct of Ian Bremmer’s recent book, Superpower. After discussing President Obama’s foreign policy and the potential effects, we will examine how the next president may shift from the current policy. As always, we will conclude with potential market ramifications.
Why Inflation Is Lower Than You Think
by Robert Huebscher,
Financial pundits routinely claim that inflation is much higher than the reported statistics. We hear, for example, that food prices have risen much faster than the roughly 1.5% increase in the CPI over the past several years. Viewed over the longer term, however, inflation is far lower than reflected in the published data.
Digital India
by Sudarshan Murthy of Matthews Asia,
During Indian Prime Minister Narendra Modi’s recent visit to Silicon Valley, he promoted his “Digital India” project, which aspires to provide easy access to a digital infrastructure for all of India. This is no small feat considering about 40% of the population still lacks access to proper sanitation. How feasible are these goals?
Dan Fuss: Rates Will Rise (and so will taxes)
by Robert Huebscher,
If there truly were a “bond king,” it would not be Bill Gross or Jeffrey Gundlach. It would be Dan Fuss, whose tenure in the fixed-income markets has spanned more than half a century. In a talk last week, Fuss warned investors to expect higher interest rates along with higher taxes.
An Important Rebalancing Milestone
by Andy Rothman of Matthews Asia,
Third quarter macroeconomic data shows that Chinese consumers shrugged off the A-share market fall, with a small acceleration in spending. While many headlines may declare that China’s 6.9% GDP growth was the slowest since 2009, it should be noted that this pace of growth was on a base that is about 300% bigger than it was a decade ago (when GDP growth was 10%), meaning that the incremental expansion in China’s economy this year is about 60% bigger than it was back in the day.
The TPP
On October 6, trade negotiators announced a final agreement for the Trans-Pacific Partnership (TPP), a multilateral trade deal between 12 Pacific Rim nations in both the eastern and western hemispheres. In this report, we will begin by discussing the nations involved. We will examine some of the details of the treaty. An analysis of the geopolitics will follow along with a look at specific political factors surrounding the treaty. As always, we will conclude with potential market ramifications.
Weighing the Week Ahead: Can Strong Housing Data Give An "All Clear" Signal for the U.S. Economy?
It is a very unusual week for data, with many of the major housing reports on tap and not much else. China’s GDP will be a big story over the weekend, and important earnings news will continue. Despite this, pundits will turn their attention to housing, asking:
Can a housing rebound signal “all clear” for the U.S. economy?
Asia Lens on Global ESG
by Vivek Tanneeru of Matthews Asia,
For Asia’s vast, newly minted middle classes, quality of life issues are increasingly becoming front and center. Governments and regulators are increasingly tackling Environmental, Social and Governance (ESG) issues and taking these problems more seriously. For investors looking to make investment decisions based upon ESG factors, Asia represents one of the best opportunities to gain exposure to companies that can make a long-term difference to the region and the world.
How NOT to Wipe Out with Momentum
Momentum investors are like the surfers we watch from beaches along the Pacific coast. Both must catch a wave. Both attempt to ride it as it breaks. But the ability to glide away smoothly before being caught inside the inevitable crash(ing wave) that follows is what determines success.
Upcoming Debt Ceiling Fight Could Get Really Ugly
Here we go again – another debt ceiling battle will play out between now and November 5 when the Treasury says it will run out of “extraordinary measures” to fund the government without exceeding the current debt limit of just over $18 trillion. If the debt ceiling is not increased, the US government will default on its debt.
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.
Despite Recent Downturn, Healthcare is the Investment of the Decade
World equity markets are trading at a high 2015E* 15 times price-to-earnings (PE), led by highly priced United States (US) stocks at about 2015E* 17 times PE. However, uncertainty has risen after recent shocks in Asia, particularly in China.
Not Making it in India
by Siddharth Bhargava of Matthews Asia,
Despite all the lip service Indian authorities give to policy reform, some smaller textile manufacturers in India still find the country’s business challenges not worth the effort. Lured by the speed and ease of setting up business abroad in countries like Bangladesh and Vietnam, their incentive to stay has diminished.
How these 12 TPP Nations Could Forever Change Global Growth
The current members include Canada, the United States, Mexico, Peru, Chile, Japan, Vietnam, Malaysia, Brunei, Singapore, Australia and New Zealand.After nearly seven years of negotiations, the TPP promises to deliver unprecedented free and fair global trade among the 12 participant nations.
Investing versus Flipping
Newport Beach may be known as home to PIMCO (and, of course, Research Affiliates). Locally, however, the business of Newport Beach is real estate finance. Many of my local friends have made a bundle in recent years flipping houses in Orange County (the OC). I have also purchased some houses over recent years, but as an investment rather than as a flip. In this article, I explain the difference between investing and speculating by sharing my personal experience investing in residential real estate.
Under Pressure: Earnings Recession Warning; Economic Recession Watch
by Liz Ann Sonders of Charles Schwab,
Many of the questions I’ve been getting recently at client events are around earnings, and whether the expected move into negative territory for earnings growth is a signal of a pending economic recession.
An All-Market Approach to Investing in China
by William Yuen of Invesco Blog,
As China transitions from a manufacturing-driven economy to a consumer-led one, the Chinese investment universe has expanded. Historically, global investors have chosen to invest in Chinese equities via Hong Kong stock exchanges. But with China gradually opening its capital markets to global investors, and more Chinese enterprises successfully listing overseas, the investment options and opportunities have increased significantly. In this changing investment landscape, we are seeing a growing trend toward investors adopting an all-market approach to investing in China.
Green Shoots in China?
by Nick Niziolek of Calamos Investments,
Over the next weeks, there will be a great deal more data for us to evaluate, including foreign reserves data on October 6. Signs of stabilization in foreign reserves and savings deposits would point to a reduced risk of capital flight, which would give us more confidence in a gradual depreciation of the renminbi. We’ll also be watching for mid-month data on imports. If these green shoots begin to take hold and the markets can become comfortable that a hard landing is off the table for the near term, we wouldn’t rule out a fourth quarter rally in Chinese and global equity markets.
The 10 Most Competitive Countries in the World
No new countries have entered or exited this exalted list, and there was very little rank-shuffling. For the seventh consecutive year, Switzerland is the most competitive country. For the fifth straight year, Singapore is number two. The U.S. comes in at number three for the second year. And so on.
World CPI Proxy Breaks Below 1%
by Eric Bush of GaveKal Capital,
There’s been a lot of of deflationary data recently (see here, here and here). The plunge in our simple World CPI proxy to the lowest level since October 2009 doesn’t really catch us off guard. The fact that one third of the 33 countries in our proxy are currently are seeing year-over-year declines in consumer prices is a bit eye-opening, however. Switzerland is leading the deflationary wave as Swiss consumer prices are down -1.4% year-over-year, more than they were at any point during the financial crisis. The year-over-year decline is the largest on record since 1959 for Switzerland.
Postcard from Huallywood
by Sharat Shroff of Matthews Asia,
First came Hollywood, then India’s Bollywood. Now, China’s Jiangsu province is hoping Huallywood will be the next film production site to make international waves. As a prime example of the China’s steady migration toward services-led growth, Wuxi studios—developed on the site of a former iron and steel factory—is trying to attract college students and independent artists.
A Fragile Transition Supported by (Further) Policy Accommodation
n the following interview, Portfolio Managers Adam Bowe, Isaac Meng and Tadashi Kakuchi discuss conclusions from PIMCO’s quarterly Cyclical Forum, in which the company’s investment professionals debated the outlook for global economies and markets. They share our views on economies and investment implications across the Asia-Pacific region over the next 12 months.
El Niño Update
Meteorologists have been calling for an El Niño event since last year. Current forecasts place the likelihood of an El Niño this winter at over 90%. Water temperatures in the Pacific, one of the first signs of a looming El Niño, have measured much higher than normal. In fact, water temperatures have been on par with the most severe El Niño event from the past 30 years. This report looks at how an El Niño develops and its possible climate, economic and geopolitical effects on the global economy. As always, we outline the potential investment implications of this event.
Staley Cates on Why Active Management Wins in the Long Term
by Robert Huebscher,
Staley Cates is president and chief investment officer of Southeastern Asset Management, manager of the Longleaf funds. In this interview, he says, “the passive movement is not just a big trend. It is a bubble.” He explains why passive investing has made it hard for value investors to outperform.
How Will These Leaders of 4 Billion People Change the World?
This week the U.S. played host to three prominent and illustrious leaders to billions of people: Chinese President Xi Jinping, Indian Prime Minister Narendra Modi and Pope Francis. Among them, they lead—either politically or spiritually—nearly 4 billion people worldwide, more than half of everyone living on the planet right now.
Visit to Cradle of Innovation and Entrepreneurship
by Rahul Gupta of Matthews Asia,
There is a lot of optimism around Indian Prime Minister Narendra Modi’s visit to the San Francisco Bay Area, and rightly so. India is expected to add more than 100 million employable workforce to the global labor pool in the next decade. The country needs to find many engines of growth to provide employment opportunities to its population. Mr. Modi understands this very well—hence his slogan “Make in India.” The Prime Minister shown his acumen in understanding productivity the technology industry can unleash, and his upcoming visit to Silicon Valley’s cradle of innovation and entrepr
China, Commodities, and Crisis: What’s Next for Emerging Markets
by Zachary Karabell of Envestnet,
China’s growth story fueled global markets for years, and the recent market rout raises concerns that the spigot may be tapping out. But is it really? Emerging markets, currently out of favor with investors, are showing signs of domestic economic growth driven by an expanding middle class. Could these economies, along with China, re-emerge as bright spots in the global markets?
Here Are Two Ways Investors Can Take Advantage of the Fed's Uncertainty
Although interest rates could still be hiked in one of the two remaining times the Federal Open Market Committee (FOMC) meets this year, I’m inclined to think they’ll stay near zero until at least 2016. The decision is a welcome one for both gold demand and new home purchases. When rates rise, gold becomes less attractive for some investors, who are encouraged to exchange their no-yielding gold for income-producing assets.
Japan Then and Now
by Kenichi Amaki of Matthews Asia,
Late in 2006, Matthews Asia was wrapping up a special report titled “Japan Reawakens.” The timing of that AsiaNow publication, just ahead of the Global Financial Crisis, was unfortunate to say the least. With the ensuing economic turmoil, Japan fell asleep again, sliding off the radar screens of many investors. But as interest in Japan has more recently re-emerged, I thought it would be important for us to take a look back and consider what we previously published. Has Japan evolved the way we had envisioned? What’s changed and what hasn’t?
More Volatility on U.S. Horizon Has Sights Turning to Asia
by Russ Koesterich of BlackRock,
After weeks of struggling, global equities stabilized last week. In the U.S., the S&P 500 Index rose 2.08% to 1,961, the Dow Jones Industrial Average climbed 2.05% to 16,433, and the tech-heavy Nasdaq Composite Index advanced an even stronger 2.97% to end the week at 4,822. Meanwhile, the yield on the 10-year Treasury rose from 2.13% to 2.19%, as its price correspondingly fell.
Results 3,101–3,150
of 4,282 found.
