Explore our thinking about today's financial markets
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Slowing economic growth and fixed income performance
September 22, 2022 | Active Insights
As a follow up to the piece we published in July that focused on decelerating economic growth and equity returns, we thought it made sense to look at how some fixed income sectors fared during the same periods. We researched this concept to better understand the historical relationship between an economic slowdown, credit spreads, and total returns.
Capital Markets Outlook
After the fall
July 12, 2022 | Capital Markets Outlook
With the S&P 500 in a bear market, the Fed’s aggressive hikes may be too late to tame inflation and too aggressive for a soft landing.
Fixed Income Outlook
Cautious stance as slowing growth may help yields stabilize
August 2, 2022 | Fixed Income Outlook
Although central bank efforts to fight inflation could end in recession, we are constructive on some areas of fixed income.
Equity Insights
Inflation is fueling opportunities in emerging markets
September 1, 2022 | Equity Insights
Despite naysayers and the macroeconomic backdrop, we are excited about the tremendous long-term potential in emerging market equities.
Slowing economic growth and fixed income performance
As a follow up to the piece we published in July that focused on decelerating economic growth and equity returns, we thought it made sense to look at how some fixed income sectors fared during the same periods. We researched this concept to better understand the historical relationship between an economic slowdown, credit spreads, and total returns.
What is the circular economy, and why is it important?
Adapting business models to be less resource intensive creates opportunity for environmental and economic benefit.
Consumer sentiment and forward market performance
In light of decades-high inflation, the Federal Reserve tightening monetary policy, and concerns about an economic slowdown, U.S. consumer sentiment has plummeted.. This year, sentiment is historically low, according to the University of Michigan Survey of Consumers.
Covid-related labor imbalances complicate Fed's inflation fight
Demographic shifts and labor imbalances might have disturbed consumption-saving decisions that impact inflation.
How an active target-date strategy can navigate interest-rate risk
Active managers are in a unique position to manage risks in target-date strategies.
Style and factor performance during economic deceleration
Investors are concerned about decelerating economic growth and what this could mean for future equity returns. We researched this question to understand the historical relationship between an economic slowdown, earnings degradation, and any subsequent style or factor performance.
Are bonds too risky right now?
With historical context in mind, we argue that the fear surrounding rising rates and their impact on bonds and retirement portfolios is likely overblown.
How markets could react to Fed and ECB meetings
A mixed batch of inflation readings moved market expectations, but it is more important to remember the Fed’s inflation dashboard.
Cracks emerge in Europe's resilience
Recent economic data and the outlook for energy supplies are casting doubt on whether Europe has the resilience to withstand a recession.
The long-term investment case for stocks and bonds
A study of the long-term investment performance of stocks and bonds can offer insights for bond investors today.
A look at leveraged loans and CLOs
A recent Active Insights podcast features a discussion of leveraged loans, and collateralized loan obligations (CLOs).
U.S. recession ifs and whens
The U.S. will likely avoid a recession in 2022, in our view. That risk rises next year as the Fed raises rates and China decelerates.
Munis after Q1 — and April — and 8 reasons why we are still constructive
While munis suffered a bad quarter to start 2022, brighter days may be ahead amid strong fundamentals.
Look beyond dividends for income from value investing
To build a value investment strategy, consider dividends in the context of overall income.
U.S. households and asset prices are at tipping point as Fed lifts rates
In a supply-constrained world, reducing asset prices may be the only way for central banks to bring demand and inflation lower.
Munis after a terrible Q1 and 8 factors that have us constructive
While munis suffered a bad quarter to start 2022, brighter days may be ahead amid strong fundamentals.
Yield curve inversion and market performance
At its March meeting, the Federal Reserve raised the federal funds rate by 25 basis points. The central bank also indicated that this is likely the start of a tightening cycle, as policymakers attempt to dampen the elevated levels of inflation seen since the start of the pandemic.
China sets ambitious growth target despite new lockdowns
China boosts fiscal spending to support its growth target in 2022 amid lockdowns in Shanghai and other cities.
Oil prices face downside risk
We expect oil prices to enter a correction stage and for Russia’s war in Ukraine to play less of a role in oil markets.
Market performance during Fed tightening cycles
In this analysis we assess asset class performance during prior cycles of Federal Reserve monetary tightening.
Russia-Ukraine War could slow global growth
The war and widespread sanctions will likely have a knock-on effect on economic growth, inflation, interest-rate policies, and the future of renewable energy.
War and inflation put bull market in hibernation
Investors may be underestimating the immense range of potential outcomes for the Russia-Ukraine War.
Renewed optimism for securitized credit
We are optimistic about pockets of the U.S. structured credit market — prepayment strategies and commercial mortgage-backed securities — despite shifts in the investment landscape.
Oil prices may correct after sanctions-related spike
While the Ukraine conflict and sanctions on Russia have lifted oil prices higher, current prices may be temporary.
Teaming up on DX: A compelling investment opportunity
As businesses work at a faster pace to modernize their technology systems, compelling investment opportunities are emerging.
Emerging markets walk a fine line
Emerging market assets — especially currencies and bonds — have proved to be resilient amid the Russia-Ukraine conflict, rising interest rates and Omicron.
Oil: From sizzle to fizzle
Crude oil prices have rocketed to seven-year highs. But we have a bearish view because current prices are unsustainable.
What to know about munis heading into Fed tightening
A look at recent monetary policy cycles to glean insights about munis heading into Fed tightening.
Precautionary stockpiling and its impact on growth
Companies are buying raw and intermediate goods at a record pace, which will influence economic growth in 2022.
Finding growth potential in unexpected places
For franchised U.S. auto dealers, consolidation and the e-commerce imperative could mark the biggest changes to the industry’s structure, possibly ever.
Charting the road ahead for ultrashort bond funds
After an eventful decade for ultrashort bond funds, we remain steadfast in our belief that an ultrashort allocation is viable in all market environments.
Help plan sponsors with the labor crunch
Facing the challenges of a labor crunch, employers may want to consider how workplace savings can help boost recruiting efforts.
How could the yield curve impact risk assets in 2022?
The Fed's policy changes will have implications for the U.S. Treasury market and other financial assets.
The Fed’s conundrum — $7 lattes, $5 gas, 0% interest rates
We believe the Fed is likely behind the curve in containing inflation with ultra-low interest rates.
Risk managers: Essential partners for delivering performance
A successful risk team is one that can analyze multiple measures of risk and work with investment teams before trades are executed to capture alpha.
$100 oil may be a pipe dream
Oil prices have risen to multi-year highs on surging demand, tight supply, and the crunch on natural gas. We believe it is time to question the current rally.
A look at the Federal Reserve’s 2014 taper
With the Federal Reserve nearing a decision to begin tapering its asset purchases, we thought it would be beneficial to look at what occurred the last time the Fed reduced its asset purchases.
Consider convertibles to hedge against the risk of rising interest rates
The potential for rising interest rates may mean it's time to diversify a portfolio with convertibles.
Regulatory storm sweeps across China
President Xi Jinping's "common prosperity" campaign to address China's wealth gap has converged with the regulatory crackdowns.
Emerging markets leading the way in innovation
Innovation is driving exciting growth across emerging market countries.
China property problem — Bigger than Mt. Evergrande
Recent default warnings from one of China's leading real estate development companies signaled a bigger property problem in the sector.
How an active core strategy can benefit equity investors
An active core strategy backed by fundamental, sector-based research has demonstrated impressive long-term performance versus passive strategies.
Post-recession market trends
How do different asset classes perform coming out of recession? Is there a drop off in performance in the second year of a recovery relative to the first year? In this analysis we look at asset class performance in the two calendar years after a recession ends.
Markets see living with Covid-19 as the new normal
Global financial markets might be pricing in a “living with the virus” environment and are adjusting to a lower growth path.
Consider stable value funds for DC plans
For retirement plan sponsors, choosing a capital preservation option can be challenging. We offer insights about stable value funds and their performance.
Taking a fiduciary view on target-date selection
It is important for a fiduciary to understand glide path features and how these features are combined in target date fund selection.
U.S. labor market — 55 is the new 65
Following broad-based recovery in the labor market when the economy initially reopened in 2020, the labor force participation rate has stagnated and started to diverge.
State financial health adds to muni appeal
State financial health has improved as tax receipts rebound and states receive sizable federal aid.
Toys, cars, and the U.S. recovery
We believe growth in the United States remains strong, but expectations need to be revised lower.
Don't overlook international small caps
When focused on diversification one asset class that is often overlooked is non-U.S. small-caps.
Time-as-a-Service, anyone?
The evolution of time-as-a-service illustrates the changing nature of economic moats, competitive advantages that protect a company’s market share.
A season for stock returns
Is there seasonality to equity market returns over time and, if so, is it repeatable, measurable, and significant? We turned to one of our favorite sources for market information, “The Stock Trader’s Almanac” to find the answers.
Fiscal impetus and the U.S. labor market
We examine the interplay between President Biden's multi-trillion-dollar stimulus plans, the labor market, and corporate profits.
If taxes go higher, will munis be hurt?
The Administration's recent plan would increase the highest marginal income tax rate but would not likely impact muni yields.
China technology stocks in a reboot, not a shutdown
China’s technology sector has cratered since February and we view the selloff as a buying opportunity in China tech.
Tracking PMI data and forward equity returns
We believe real economic growth is likely to reach levels not seen in the United States since 1983–1984. Our best estimate is for real GDP to approximate 6.5% year-on-year growth in 2021.
What do yields reveal about inflation expectations?
Investors can monitor these relationships to understand the underlying drivers of nominal yields.
From V-shaped recovery to bond vigilantes
The Federal Reserve remains dovish on monetary policy as bond market vigilantes push yields higher.
Clean energy: Myths, reality, and opportunities
We believe many companies are poised to benefit significantly from the big shift toward renewable energy.
Pandemic recovery: Who may benefit once the dust settles?
Uncertainty still surrounds the future of Covid-19 and various vaccines, but we're already seeing clear differences in consumer and business behavior since the pandemic.
American Rescue Plan strengthens state and local finances
The American Rescue Plan Act provides billions in federal stimulus to states and local governments.
Why think twice about investing in an EM ETF
Active management can offer superior performance when investing in an emerging markets ETF.
Massachusetts budget taps rainy day fund, federal aid
The Governor of Massachusetts introduced a budget proposal that includes a withdrawal from the state’s rainy day fund and federal aid to balance the budget.
Munis in demand with new taxes possible
Demand for municipal bonds continues to be robust in 2021.
Company diversity and social justice
Company diversity is a step toward equity and equity is a step toward inclusion, which is important to company success.
New York confident about recovery
New York leaders are confident about the state's economic recovery.
Thinking about growth investment? Consider your exposures.
The technology and healthcare sectors stand apart for bringing new products, ideas, and services to market.
New medicines and digital tools target mental health
In recent years, there have been several developments for treating mental health. These innovations — which come after decades of slower-paced advances — include novel drugs and digital offerings.
Is inflation poised to return?
We believe that pandemic-related bottlenecks have temporarily lifted U.S. inflation. Still, the underlying inflation trend is weak.
California budget outlook brightens
With revenues coming in higher than projected, the outlook for the California budget is positive in the near term.
Mental health is a business issue: How companies are supporting their employees
Companies are beginning to focus more on mental health at work, and some are offering a wider range of supportive and preventive care.
U.K. starts new chapter after EU split
It is strategic for the U.K. to have a trade deal with the EU given the short- and long-term negative effects of Brexit.
Vaccine not in time for jobs recovery
The U.S. labor market continues to lose steam as fewer Americans were able to find work amid surging Covid-19 cases.
Record-setting muni issuance pauses post-election
Muni issuance pauses post-election, but reinvestment demand typically increases near year-end.
Oil markets pin hope on vaccine and OPEC+
Oil prices are likely to trend slightly higher as OPEC+ mulls maintaining lower output in 2021 and demand recovers in key markets such as China.
Calls for new stimulus as recovery fizzles
Governments are trying to calibrate their policies to support growth as “fiscal cliffs” loom amid a resurgence in the virus.
Post-election option markets show uncertainty for new reasons
Two weeks after Election Day, we believe the markets have a lot more clarity, but options markets reveal uncertainty.
U.S. politics amid virus surge
U.S. election politics are playing out against a backdrop of an easing recovery, rising COVID-19 cases, and a potential new vaccine.
Munis outpace Treasuries, taxable bonds
The recovery in the municipal bond market continued in the third quarter as munis outpaced U.S. Treasuries and the broader taxable bond market.
China leads, other emerging markets lag
China is leading the economic recovery among emerging-market countries, buoyed by stimulus and stringent COVID-19 measures.
Pandemic persists in policy patchwork
Fiscal and monetary policies will be central to the economic recovery between now and the availability of a COVID-19 vaccine.
U.S. economy remains a centerpiece in 2020 vote
Fiscal policy will be a key focus for investors after the November election.
The global economy and the race for a vaccine
The development of a vaccine will play a role in shaping the global economic comeback in 2021.
If taxes move higher, demand for munis may surge
The likelihood of higher taxes in the future could boost demand for tax-advantaged investments including munis.
Keeping Japan's economy afloat after Abe
Prime Minister Shinzo Abe's resignation raises questions about the future of Abenomics and reform in Japan.
Investors returning to municipal bond funds
Municipal bond funds rebounded in the second quarter as investors returned to asset classes they abandoned early in the pandemic.
Muni-bond market slowly reviving from COVID-19 setback
The Fed helped the muni-bond market revive the muni-debt market as states and local governments grappled with revenue disruptions.
The Fed’s flexible new policy
The Fed announced a shift in its approach to monetary policy and the new strategy can be viewed as a flexible form of average inflation targeting.
The future is happening faster now
We rarely see as much disruption as we have seen in 2020, and we believe this offers investment opportunities.
Perspective on keeping perspective
Five months into our pandemic environment, financial professionals are looking for ways to keep their work in perspective.
Deglobalization creates new winners in China
The trade war, pandemic, and the Made in China 2025 initiative are resulting in a deglobalization trend and opportunities in China.
Staying at home increases spending on homes
As the economy continues to be challenged by the COVID-19 pandemic, we are seeing two notable trends in the U.S. housing industry.
V-shaped recovery proving elusive
The U.S. and global economic recoveries are unlikely to be “V-shaped” as businesses and consumers remain wary of returning to pre-pandemic behavior.
Vaccine is a wild card for the economy
A vaccine for the coronavirus will be supportive of risky assets even if the economic benefits take longer to materialize.
Risk sentiment swings with Fed tapering
Without a proactive Fed, the rally in risk assets would be in trouble.
Europe displays rare unity over relief fund
In a step toward closer ties, European Union leaders plan to discuss a recovery fund for countries hardest hit by the pandemic.
U.S.–China war of words playbook
The politics of the U.S.–China relationship have clearly become more complicated recently. The war of words over China’s handling of the coronavirus outbreak and the proposed new Hong Kong security law has the potential to create headwinds for the global economy and financial markets.
Disruptive change: A growth driver for small companies
Disruptive change is often the force that enables small companies to compete against their larger peers.
Navigating market turmoil: Our intrinsic value compass
Our investments in the communications sector help illustrate our intrinsic value approach to finding opportunities.
U.S. economic fog lifts slightly
It is encouraging that some stabilization has started in the United States and the economic data fog is lifting just a little; but we forecast a low probability of a "V-shaped" recovery.