Outcomes from the most recent state budget season, which concluded for most U.S. states on 30 June, underscore the need for caution among municipal bond investors.
With critical policy pivots on the horizon, investors should approach asset allocation with full appreciation for downside risk and stay focused on relative value and security selection.
Earlier this year, Argentina, the Czech Republic and Uruguay joined the bellwether benchmark for the asset class, JPMorgan GBI-EM Global Diversified, taking the total to 18 countries. China, Egypt and another three countries may enter the index next year. The inclusions will make the EM local debt asset class much larger, deeper and more liquid.
Over the past quarter century, large and ever-larger companies have significantly increased their share of total intra-industry sales across a majority of industries. These superstar firms – including Facebook, Amazon, Apple, Netflix and Alphabet’s Google (known collectively as FAANG) – increasingly dominate their respective industries in terms of revenues, profits and stock market capitalization. The winner these days may not take all, but most.
After Japan’s Prime Minister Shinzo Abe reshuffled his Cabinet on 3 August, the big question is whether his administration can regain public support. In just the last two months, Abe's public approval ratings have plunged to around 30% – low enough to raise red flags.
The muni backdrop looks benign, but be mindful of potential credit risks.
Bond investors are from Mars, and central bankers are from Venus – or so suggests the bond market’s negative reaction to signals that the exceptional monetary policy accommodation of the last decade is winding down. Risk-asset markets, however, are ignoring the red flags that the bond markets are waving. Are they right?
The UK Financial Conduct Authority (FCA) announced on 27 July that it would not sustain the London Interbank Offered Rate (Libor) – the key (and controversial) benchmark for hundreds of trillions of derivatives contracts – after 2021.
Five years ago this week, Mario Draghi’s landmark “whatever it takes” speech turned the tide of the euro crisis, the president effectively clarifying the European Central Bank’s role as a conditional lender of last resort to eurozone sovereign borrowers.
Much of the world has been waging a cold currency war since the autumn of 2016, and so far the winner is Donald Trump. The dollar rally that followed the U.S. election is over, and this past week the U.S. Dollar Index (DXY, which tracks the dollar’s value versus a weighted basket of major currencies) sank to its lowest level in more than a year.
Asia’s integration into world financial markets may be accelerating.
When PIMCO professionals gather for our annual Secular Forum to discuss the long-term global economic outlook, views on Europe invariably gravitate on two themes: anemic GDP growth and political risk.
Why is the U.S. housing sector diminishing when demand for housing remains robust?
The Federal Reserve is likely to begin normalizing its balance sheet in 2017. Why hasn’t this news rattled the bond market?
A growing number of Federal Open Market Committee officials have voiced concerns over decelerating inflation since the June FOMC meeting, and the latest inflation print likely did little to alleviate them.
A review of last month’s market-moving events across countries and asset classes.
Since the global financial crisis, the notion of what constitutes an appropriate liquidity management and capital preservation strategy has become a source of heated debate among professional institutional investors and retail-oriented allocators alike, with varying opinions on how to balance a preference for returns against the need for immediate liquidity and capital preservation.
After 25 years of steady economic growth, Australia is on the verge of wresting bragging rights from the Netherlands for the longest period on record without a recession. While this historic event should be celebrated, the future may not be as rosy.
An active approach to the complex, fragmented municipal bond market may help investors avoid several common drawbacks of passive strategies.
Equity market peaks (and troughs) are impossible to identify in advance. But this doesn’t mean that equity investments should simply be “set it and forget it.”
The Federal Reserve hiked rates as expected at its meeting on 13–14 June 2017, and it made news by providing important details about its plans to normalize its balance sheet. However, one crucial detail the Fed did not provide: when it will commence that process of balance sheet normalization.
Normalization of the European Central Bank’s (ECB) monetary policy never was a question of “if” but one of sequencing, timing and calibration. Financial markets reacted to ECB President Mario Draghi’s speech in Sintra this past week in a way suggesting the ECB might change all three of those policy normalization parameters.
There has been a lot of discussion about a recent academic paper, "Why Indexing Works," which makes a statistical case for passive investing in equities. The same logic applied to bonds, though, may make the opposite case: Passive fixed income management doesn't work, but active bond management does.
Just as the global economy faces a number of important pivot points that investors should look for over the next several years, so some domestically generated pivot points will shape the UK economy in the coming years – largely stemming from UK politics.
The effort to repeal and replace “Obamacare” hit yet another stumbling block this week when U.S. Senate Majority Leader Mitch McConnell decided to pull the bill from consideration after realizing he did not have sufficient votes for it to pass.
The global economy faces several potential pivots in the direction and scale of monetary, fiscal, trade, geopolitical and exchange rate policies. One in particular will help determine the long-term outlook for China and emerging Asia.
According to the Global Sustainable Investment Alliance, over $22 trillion of assets were managed under responsible investment strategies globally in 2016, up 25% from two years before. This is one of many statistics showing Environmental, Social and Governance (ESG) investing moving into the mainstream. We see 10 major trends contributing to the rise.
This is an exciting time to be an investor, but it’s also a very uncertain one. Risks to both the upside and downside are much higher than they were even a year ago.
The U.S. bond market’s post-election optimism has now evaporated: The 10-year nominal U.S. Treasury yield has dropped by almost half a percentage point from its mid-March 2.62% post-election high, with lower implied inflation rather than lower real yields accounting for most of the decline.
Why falling commodity prices may not upend the EM rally.
Another soft U.S. core Consumer Price Index (CPI) inflation report – the third in a row that has lagged expectations – could complicate the Fed’s intentions to raise rates one more time this year, as the central bank’s Summary of Economic Projections currently forecasts.
Market participants increasingly expect the Federal Reserve to begin unwinding its balance sheet during the second half of 2017, and many have speculated that the agency mortgage-backed securities (MBS) market – and the U.S. housing market more broadly – could suffer as a result.
Political risk, reform efforts and potential monetary policy shifts cloud the outlook for China, Europe and the U.S.
New equity offerings can garner media buzz. Think of recent initial public offerings (IPOs) by Snapchat, Alibaba and Visa. Business media enthuse, investors clamor, and share prices often rise, at least initially.
A review of last month’s market-moving events across countries and asset classes
With the probability of recession sometime in the next five years around 70% in our view, now may be a critical time to prepare for when the cyclical tailwind that began last year begins to fade. Over the next five years, the global economy may undergo five significant pivots in the direction and scope of monetary, fiscal, trade, geopolitical and exchange rate policies. Are investors too optimistic about the future economy? We address this and other crucial questions in PIMCO’s 2017 Secular Outlook – our long-term view for the global economy and markets.
The minutes of the May Federal Open Market Committee (FOMC) meeting, released Wednesday, provided (as expected) more information on the committee’s thinking about how and when to start the policy of normalizing the size of the Federal Reserve’s balance sheet.
In its recent quarterly inflation report, the Bank of England gave the market some fascinating insights into the challenges it will face in setting appropriate monetary policy over the coming years.
How can equity investors address the triple threat of a low return environment, scarcity of alpha and the tendency to chase performance?
When evaluating investment strategies it’s critical to understand the nature of the leverage being used.
Why understanding Environmental, Social and Governance (ESG) factors is critical for credit analysis of European utilities.
The oil market outlook is always a bit complicated, in part due to the impact OPEC can have on balances. For all the attention paid to changes in U.S. shale output, OPEC is capable of swinging oil balances more in a single month than U.S. shale can in a year.
Active management has the potential to provide diversification, generate income and mitigate the risks of higher inflation and rising rates.
In many ways the filings may mark “the end of the beginning” (as Churchill once said) of this chapter for Puerto Rico.
Unlike in March, April’s soft inflation across a range of core goods and services prices cannot be explained away by large, one-off price adjustments or other quirks in the data.
In this issue, Research Affiliates offers insight into its CPI-based secondary return benchmarks, its business cycle modeling and continued opportunities in emerging markets.
Centrist candidate Emmanuel Macron will be inaugurated as the next French president on 14 May, thanks to a clear win in the second-round runoff against the far-right candidate Marine Le Pen.
Brazil is often known for soccer, samba and pristine beaches. Among investors, something else also stands out about Brazil: double-digit interest rates that are significantly higher than its peers’ (see chart). That may soon change.
A bottom-up look at major industries around the world reveals significant potential for productivity growth.
