Creative solutions may be needed to address remaining asset quality issues in Europe’s banks.
With stocks hitting record highs, many investors want to mitigate the largest source of risk in their portfolios – equities. In recent decades, fixed income has served this purpose well. The asset class has generally delivered both positive returns and negative correlations with equities.
President Trump has announced Fed Governor Jerome Powell as his nominee for Chair of the Federal Reserve Board. A Fed governor since 2012, Powell has been confirmed twice by the U.S. Senate and likely will be confirmed as chair without controversy in time to take over when current Chair Janet Yellen’s term expires in February 2018.
For the first time in over 10 years the Bank of England raised its official policy rate, a hike of 0.25% to 0.5%. The rationale is a combination of growth continuing at or slightly above trend, unemployment falling further from its current 42-year low...
One could argue that this latest statement came in on the dovish side. But a broader read rapidly dispels that notion.
Our central expectation for the European Central Bank (ECB) meeting on 26 October is for the Governing Council to extend asset purchases by nine months at €30 billion per month to September 2018, without yet committing to a specific end date, while strengthening its commitment to keep policy rates and the balance sheet unchanged when asset purchases end next year.
Actively managed front-end strategies may be able to mitigate the erosion of real capital experienced in passive benchmarks as rates rise.
A global factor helps explain why central bank policies often tend to be correlated across countries.
Unprecedented changes are reshaping the financial advice industry and affecting portfolio construction for individual investors. New regulation, technological innovation, capital market trends and the prospect of lower future returns are all exerting profound effects.
The governing coalition of Abe’s Liberal Democratic Party (LDP) and the smaller Komeito Party staged a big win in the snap election. Although recent public polls indicated a victory, the final tally was on the higher side of consensus expectations, including ours.
If the pace of monetary tightening in the U.S. is any sort of leading indicator for policy tightening in the rest of the world, including Australia, then in Australian parlance, it will be “like watching grass grow.”
Emerging markets debt and equity have many overlapping traits, but also differ in their exposure to countries and risks. The MSCI Emerging Markets Index contains 27 countries, with the five largest accounting for 70% of market value. Three countries in Asia - China, South Korea and Taiwan - comprise more than 50% of the index.
Global central bankers, ministers of finance and representatives from the private sector and civic groups gathered in Washington, D.C., last week for the Annual Meetings of the IMF (International Monetary Fund) and the World Bank Group.
Despite a hurricane-related surge in headline inflation, core inflation continued to run softer than expected in September, a trend that could make the Federal Reserve more cautious about hiking interest rates in December.
Last Month in Perspective: The convoy of developed world central banks reducing policy accommodation appeared to gather steam. Global political developments continued to capture headlines. Interest rates moved higher on the hawkish tilt in central bank rhetoric, and equities gained on generally positive economic data.
Policymakers in Washington have recently expressed growing concerns about the (planned) dwindling of capital levels at Fannie Mae and Freddie Mac – the two government-sponsored enterprises (GSEs) that help finance the vast majority of U.S. mortgages.
While PIMCO’s cyclical outlook is cautious overall, our outlook for emerging markets ex-China (EM) is more constructive. We expect further improvement in the EM macro picture as most emerging economies are at a different stage of the economic cycle than developed economies and they are still benefiting from relatively easy global policy conditions.
The unique attributes of corporate crossover bonds may offer solutions for investors assessing a range of objectives and risks.
Considered the most important political event in China, the National Congress of the Communist Party, held once every five years, has the potential to reshape the political landscape of personnel, policy and institutions for the next decade.
We believe it’s not too late for investors to seek attractive relative value opportunities and reposition equity exposures in this aging cycle.
In recent weeks Brent crude oil, the global oil benchmark, has shifted into backwardation – a state when spot prices are higher than prices for futures contracts, creating a downward-sloping curve for futures prices.
An analysis of default rates and government intervention since the financial crisis.
Russia has been front-and-center of the news this summer. Yet Western sanctions over Crimea, fallout from the investigation into meddling in the U.S. presidential election and last month’s bailout of the nation’s largest privately held bank have failed to thwart Russia’s emergence from stagflation.
With great fanfare, the White House and Republican congressional leadership released their long-awaited framework for tax reform, but many politically thorny issues need to be resolved – and quickly – before investors can feel confident that tax reform will materialize in the coming months.
We see three risks to the outlook for steady economic growth. Yet we also see opportunities for investors to target above-benchmark returns while emphasizing defense at a time of low volatility and full valuations.
Tail risk hedging seeks to protect gains without loss of upside equity potential.
Broad-based support for Europe among Germany’s key political parties vying for seats in the Bundestag’s 19th legislative period meant Sunday’s election was unlikely to be disruptive for financial markets. And the muted reaction in financial markets Monday morning confirmed this was the case.
Master limited partnerships, once considered utility-like yield instruments, have come to be viewed largely as leveraged commodity investments – but is the pendulum about to swing back?
Going into today’s important Federal Reserve meeting (with a press conference and an update to the economic projections, aka the “dot plot,” along with the usual statement), we at PIMCO along with most market participants expected the Fed to announce formally the start of balance sheet reduction this fall, perhaps in October. And that’s exactly what the Federal Open Market Committee (FOMC) did.
After a sustained period of return leadership by U.S. stocks, a number of diversifying assets now appear poised for outperformance.
As many observers expected, after five months of surprisingly soft inflation prints, prices firmed in August. U.S. core CPI inflation (which excludes the volatile food and energy categories) was up 0.25%, boosted by the largest-ever one-month increase in hotel prices and surprising firmness in rents and owners’ equivalent rents (OER).
A review of last month’s market-moving events across countries and asset classes.
Unmet borrower needs continue to grow in the U.S. commercial real estate lending market.
Analysis of environmental, social and governance factors (ESG) is particularly important for bank investments because the confidence of their depositors and borrowers largely drives banks’ valuations.
Momentum, trend-following, managed futures - are terms that can seem intimidating and opaque for many investors. But, while these types of investment strategies may be less familiar than traditional strategies, they can be quite intuitive and offer attractive diversification and return potential that is worth getting to know.
Our approach to investing in long duration and long credit portfolios has delivered meaningful alpha over most market cycles.
After an uncharacteristically eventful August in Washington, Congress returns to D.C. for an even busier fall: In September, it has a mere 12 legislative days to fund the government for fiscal 2018 (and thus avoid a shutdown), raise the debt ceiling and address a smattering of other must-pass bills...
Although inflation may seem a distant threat, even modest inflation can prove devastating to retirees who depend on income that does not adjust with inflation.
Who will be the next governor of the Bank of Japan (BOJ)? This is an important question to be answered in the next several months, as Governor Haruhiko Kuroda’s current term will expire in April of next year.
Federal Reserve Chair Janet Yellen’s remarks at the annual Jackson Hole Economic Policy Symposium delved into history but offered few clues about the future course of Fed policy.
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.
U.S. exploration and production (E&P) companies delivered mixed second-quarter earnings results and guidance, with evidence of operational missteps by certain Permian Basin producers. One particular large producer’s report of drilling delays, higher planned well costs and higher gas-to-oil ratios sparked broader concerns about whether Permian producers can maintain efficiencies and execute on plans to drill larger wells.
The use of credit to fuel growth in China is weakening, a trend that has begun to depress demand for imports. Given China’s seminal role as an engine of global growth, the ripple effects will weigh on growth prospects for the countries most exposed to Chinese demand, including those in Asia and Latin America.
The news coming out of the July Federal Open Market Committee (FOMC) meeting was a reference in the statement that the Federal Reserve expected to begin to implement its balance sheet normalization program “relatively soon,” which we (along with many market participants) took to mean at the upcoming September meeting.
A review of last month’s market-moving events across countries and asset classes
Following another underwhelming U.S. CPI report, it’s now entirely possible that core personal consumption expenditures (PCE) inflation – the Federal Reserve’s preferred measure, currently at 1.5% – will end the year at 1.3%, a far cry from the central bank’s 2% target.
Another underwhelming rise in the U.S. core Consumer Price Index (CPI) reported on Friday increases the chances that Federal Reserve policymakers use the September meeting to signal they plan to abstain from additional interest rate hikes until next year.
Over the next 12 to 24 months, we expect that Asia, led by China, will become a far more significant part of the global capital markets – and global investment portfolios.
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.
