June Rate Hike Said Unlikely as Economy Improves

United States federal reserve

If The Fed Chair Speaks Late On a Friday Afternoon Before a Long Weekend, Investors Should Still Listen

If the economy continues to improve as expected, the first hike will come in 2015: “It will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy.” Pay little heed to the Q1 slowdown…unless there is no Q2 bounce. The “apparent slowdown was largely the result of a variety of transitory factors.” The Federal Open Market Committee (FOMC) “must take policy in a forward-looking manner” or “risk overheating the economy.”

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Extracting Opportunities in European Equities – Focus on France

Seine in Paris with Eiffel towerFrench Equities – Core Country but Not Core Holding?

Given the increased interest in European Equities at this point – this is the second in a series of blogs focusing on different countries in the Eurozone and potential opportunities within each equity market.

A View from the European Equities Desk Continue reading

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Why did bonds sell off and yields rise?

184902753Views from the European Investment Grade Fixed Income team

Numerous reasons have been advanced for the rise in bond yields, ranging from credible to not very credible. Let us look at some: Continue reading

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A Reminder that Low Liquidity Breeds High Volatility

Hair Pin Bend SignAfter trending lower through mid-April, the Euro and EZ sovereign yields began a sharp counter-trend rise. That ‘mini-trend’ continued powerfully through mid-week, then partially reversed.

The timing of the inflection points and severity of the moves suggests that profit-taking, the triggering of stop-loss orders, and the unwinding of crowded/leveraged trades are better explanations than economic news. If so, the end-of-week reversal may suggest that the move may have run its course…but the whole episode reminds me that low liquidity breeds high volatility. Janet Yellen’s comments, which I’ve outlined in an earlier blog, are especially interesting in this context.  Continue reading

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Listening Closely to Janet Yellen (It’s Not about Equity Valuations)

Federal Reserve BuildingIn a question and answer session with the IMF’s Christine Lagarde last week, Fed Chairman Janet Yellen made a number of statements about systemic risks, but the media highlighted her equity valuation soundbite – that valuations “are at this point generally quite high.” The soundbite was quoted out of context and the market generally ignored it (that is, it didn’t really move the market). The broader context is, I think, more interesting, as equity valuations were not the most significant risk she cited.

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