“Whatever it Takes” Two Years Later: What’s New?

Today is the second anniversary of Mario Draghi’s “Whatever it takes” pronouncement during the darkest days for the euro. Let me share with you some thoughts on how that event probably changed the course of the Eurozone.

Draghi’s speech did what it was supposed to do – it preserved the euro and it calmed the economy and the financial markets – without costing a single euro. The most important measure of success is that after the speech, the Outright Monetary Transaction Program (OMT), which allowed the European Central Bank (ECB) to buy short-term bonds from euro governments, was not utilized even once. The bottom line: The speech and the program were nothing more than a communications initiative, albeit an extremely adept one.

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U.S. Forecast Update: Growth, Inflation and Central Bank Policy

Pioneer’s Head of Global Asset Allocation Research, Monica Defend, along with U.S. and Latin America Global Asset Allocation Research Economist, Annalisa Usardi, recently released an update on the U.S. economy. The update was based on the Bureau of Economic Analysis’ (BEA) release of the third and final estimates 1Q14 gross domestic product (GDP), which came in lower than expected. The forecast update focuses on three areas: growth, inflation and central bank policy. Below are some highlights from their report. To read the full report, click here. Continue reading

Labor Market Looking More “Healed” Than “Healing”

Observations on the Capital Markets – Week Ended July 18, 2014

Federal Reserve Chairwoman Janet Yellen’s Congressional testimony this week, in my view, was not pointing to bubbles. In her testimony, she suggested that valuations of social media and biotech stocks and lower-rated corporate debt appear “stretched.”  Some observers suggested she was saying we are in a bubble.  But I have a different perspective: I think she was saying, in effect, “yes, prices are high in some niches, but not generally.” In any case, it’s doubtful Yellen is shifting her focus from less-than-full-employment to the question of possible market bubbles. Continue reading

Puerto Rico Bonds Part II: Understanding the Volatility

Follow-up to February’s article Puerto Rico: A Delicate Balancing Act. 

In June of 2014 the Commonwealth of Puerto Rico’s legislature passed the Puerto Public Corporations Debt Enforcement and Recovery Act (the Act) for restructuring the outstanding debt of public corporations. Its passage got a cold reception from the municipal bond market. Continue reading

Bubbles Detector

Summer is time for vacation, and getting ready for a trip has become almost a ritual for me: pack bags for my large family, load the car, don’t forget the GPS and check weather conditions. The last two points, I believe, apply not only to planning a safe and comfortable personal trip, but also to navigating the financial markets.

The financial “weather” seems nice: volatility is extremely low across almost all asset classes, as a consequence of the extra-loose monetary policy. However, as with the weather, we are aware that financial conditions can rapidly change. History suggests that periods of exceptionally low volatility should be treated with skepticism, as they have usually preceded vicious market turmoil. Continue reading

What Happened within the Espirito Santo Group?

Observations on the Capital Markets – Week Ended July 11, 2014

It was a tough week for Europe over all last week – industrial production declined in Germany, Italy, France, and the UK, with the details broadly downbeat. Trade (import and export) data, especially from Germany, was disappointing as well. But the big story in Europe last week came from Portugal, where Banco Espírito Santo (BES), a leading Portuguese bank, suffered a share price crash and trading was suspended after reports of financial irregularities.

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World Cup Syndrome? Few Yellow Cards in Last Week’s Data.

It’s not surprising that World Cup Syndrome has historically been responsible for lower office productivity around the world – in fact, you may have seen the telling chart created by Bloomberg, which uses European Central Bank (ECB) data to track dips in trading volume during games in the 2010 World Cup.

Perhaps ‘WCS’ is owed a nod for last week’s drop in ISIS (Islamic State) activity? The so-called Group of Death (Syria, Iran, Iraq, and the caliphate formerly known as ISIS) was very quiet last week.

  • ISIS renamed itself the Islamist State and said it was a caliphate.
  • Iraq’s parliament appears frozen, with Sunni, Kurdish, and Shiite factions apparently unable to strike a deal.
  • It appears that the Islamist State gained ground…but oil traders don’t seem worried.

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