2nd Quarter U.S. GDP — OK not Great. New Reporting on What’s Counted Questionable

Wardwell Market Report 7/31/13

Second quarter 2013 U.S. Gross Domestic Product (GDP) growth came in at 1.7% (flash estimate) better than the 1%-ish growth some feared . . . but first quarter growth was revised down from 1.8% to 1.1%, so first-half growth is not surprising on the upside, despite the decent second quarter report.

  • Personal consumption expenditure growth was weaker than typical, holding growth down.
  • Nonresidential investment, residential investment, and business inventories were fine.
  • The trade deficit (a small increase) and government (essentially flat after two quarters of being a drag) were small numbers. Continue reading

Detroit: Teetering Domino of the Municipal Bond Market?

My colleague, Jonathan Chirunga, is a municipal bond credit analyst and portfolio manager at Pioneer who offered these thoughts on Detroit and the impact of its potential bankruptcy on the municipal bond market.

Pundits have been calling for Municipal Armageddon since the Great Financial Crisis (GFC) of 2008. A combination of runaway debt issuance, plummeting tax receipts, massively underfunded pensions, and, in some cases, outright corruption, were all elements of the plotline. In 2010, a now notorious “Chicken Little” alarm sent the Municipal market into a tailspin, auguring default for hundreds of billions in municipal securities as cities and municipalities collapsed in domino-like fashion. Just recently, the municipal market took another hit – this time as a result of a violent back up in treasuries as investors (ironically) now see a greater risk in faster-than-expected economic recovery. But during this period of time the poster child of the Domino crowd—Detroit sought bankruptcy protection. Thus, the question remains: is this the beginning of a larger default wave? In which case, could municipal securities get slammed from both a simultaneous rise in interest rate risk and credit risk? Continue reading

Quiet Capital Markets Last Week – So Far, So Good?

Wardwell’s Weekly Market Report

Observations on the Capital Markets – Week Ended July 26, 2013

• Earnings watch: halfway through year – so far, so good
• Minimal, but OK key economic data – mixed signals in housing
• Global markets watch Continue reading

The Damage Potential of Rising Rates

The initial goals of the Federal Reserve’s “Great Monetary Experiment”— to keep rates low, create negative real yields, spur consumption and cushion the budgetary consequences of fiscal stimulus — have largely been accomplished. Investors could now face the threat of rising bond yields. Various bull and bear scenarios might ensue. What are they and what could trigger them? What are the risks to portfolios? Continue reading

Stocks and Bonds Both Again Rally as Bernanke Soothes

Wardwell’s Weekly Market Report

Observations on the Capital Markets – Week Ended July 19, 2013

  • Detroit files for bankruptcy: pensioners and bondholders square off
  • Bernanke on Capitol Hill: no surprises
  • Still on “soft parch” watch, but last week’s economic reports were generally solid
  • Inflation remains quiet
  • U.S. retail sales fell short of forecasts
  • Housing: Too soon to know the impact of higher interest rates
  • The Bernanke “put” remains in place in the housing market
  • Europe watch: Greece crosses a key hurdle
  • China watch: GDP doesn’t disappoint
  • Japan watch: after the elections comes the hard part
  • Earnings season: so far, so good
  • Washington watch
  • The week ahead Continue reading

China’s Curbs on Bank Lending: Implications for the World Economy?

The following is a result of a recent conversation I had with Mauro Ratto, our Head of Emerging Markets, here at Pioneer Investments.

China’s stock market was down very sharply in June, with banks under severe pressure. Are investors right to fear that growth is at risk?
Banks are by far the top-weighted sector group in China, so there’s little chance for the broad market to buck the trend. Indeed the problem is sector-specific at first glance. Policy makers want to curb excess bank lending in an effort to make the industry better managed and more selective. The People’s Bank of China’s attitude suggests that banks are short of money after lending too much and thus deserve punishing interest rates to cover the shortfall. That’s very draconian and so different from the way developed countries regulate their banks.

Continue reading

Did Bernanke’s Dovish Comments Please the Markets?

Wardwell’s Weekly Market Report

Observations on the Capital Markets – Week Ended July 12, 2013

  • The Federal Open Market Committee (FOMC) minutes reinforced expectations of QE tapering
  • Two quick comments on energy prices
  • The U.S. budget deficit continued to fall
  • U.S. economic data was mixed on balance
  • Inflation (ex-energy) remained tame
  • China watch: weak economic data helped the stock market rally
  • Europe watch

Continue reading


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