The last six years have witnessed the most severe financial crisis since the end of World War II, with household earning capacity and saving ability experiencing significant changes due to the downturn in the real economies. This challenging economic situation definitely affected household saving behavior, although the impact has been different in various countries – for some, the impact on household earning capacity was more intense than others. (more…)
To taper or not to taper—that is the question the Fed is asking itself. What’s moving the market is (it appears) the odds of Fed action. For the first half of last week, “good news was bad news” as stock and bond markets apparently interpreted better economic data as suggesting an earlier QE (Quantitative Easing) Taper. On Friday, the market apparently decided the jobs report was good enough to further reduce downside risks to the economy but not strong enough to spur the Fed to action. (more…)
As the year draws to a close, investors are searching for clues as to what may be in store for the economy and markets in 2014. What have we learned from the markets in the month of November? Honestly, not very much. The scenario has not changed much in the last 30 days.
As my colleague Sam Wardwell has chronicled in his weekly market reports here on followfPioneer, the U.S. has seen steady, slow growth and improvement in some leading indicators, such as the PMI Manufacturing Index for November, which came in above consensus at 54.7, a 10-month high.
Filed under: Equity Market Insights, Europe, GDP, Macroeconomics, Marco Pirondini | Tagged: budget discussions, Capital Markets, Europe, European markets, Japan, Marco Pirondini, QE Tapering, Sam Wardwell, the Fed | Leave a Comment »
In the last few weeks we have heard a lot of noise from different newspapers and television programs saying that we are in a big equity bubble. Honestly, I don’t see it. It’s been almost two years since we’ve had any meaningful correction, and we can’t rule out the possibility of one in the future. However, I don’t think we are in a bubble.
The market is trading at roughly 17-17.5x 2013 earnings. It seems to me that the multiples are within the historical ranges, despite a world with no inflation and historically low interest rates. I don’t think this market is cheap, but to call it expensive is really a stretch. In 2000, our last equity bubble, the market was trading at 60x trailing earnings.
Investors Should Keep Focusing on Equities
Large-cap stocks are especially attractive. Mid-cap and small-cap are a little bit more expensive – in some cases quite a bit more. However, that has been the case for the last few years. So not only do I see a lack of valuation bubble in the market, I still think that, with very little wage growth, we may see multiples continue to expand if GDP is growing at 2.5 – 3%.
I believe 2014 will be another year in which investors should consider increasing their equity exposure. I think any correction will be a good opportunity to invest in this market, where many investors have missed out. Usually, when we see a big bubble, it’s because valuations are very stretched and everybody’s in the market.
So I think that those pundits who are calling this market a bubble are really missing the big picture here. And I think investors should keep focusing on equities because they will continue to deliver better results than fixed income.
Weekly Market Report
Observations on the Capital Markets – Week Ended November 29, 2013:
- U.S. economy slowly gaining traction – what’s ahead for year-end?
- Last week in the capital markets: another quiet week
- U.S. business activity indicators appear generally solid
- Other economic data was mixed…not bad
- World watch: Europe, Japan and China
U.S. Economy Slowly Gaining Traction – What’s Ahead for Year-End?
As we enter the final month of 2013, my themes of the last several weeks continue – the capital markets, in general, remain quiet and U.S. economic data, while mixed, shows signs of steady improvement. This week, I’ll start by looking forward to some news we’ll be watching as the year closes out . . .
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Macroeconomics, Sam Wardwell | Tagged: Bonds, Capital Markets, debt ceiling, emerging markets, European markets, Fed tapering, Sam Wardwell, Slow growth, tapering, U.S. Treasuries | Leave a Comment »
Weekly Market Report
Observations on the Capital Markets – Week Ended November 22, 2013:
- Fed watchers see signs of quicker QE
- Washington and the world: Some important developments
- The capital markets were quiet, except for currency chatter
- Watching the U.S. economy
- Watching Europe, Japan and China
Fed Watchers See Signs of Quicker QE
NY Fed President Dudley (a dove) sounded upbeat about the economy in a speech last week. Fed Chairman Bernanke hinted at the Fed moving from quantitative easing (QE) to “forward guidance”, saying “The mix of the tools will change somewhat over time.” Separately, he called the rise in bond yields “unwelcome and unwarranted”.
The FOMC (Federal Open Market Committee) minutes contained no real surprises . . . consistent with the Fed beginning to taper QE soon (data dependent, of course). They showed the Fed talking through lots of ideas.
The Senate Banking Committee sent Janet Yellen’s nomination to the Senate floor; expect her confirmation promptly.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell | Tagged: Bonds, Central Banks, China, currencies, ECB, emerging markets, Europe, Fed tapering, Janet Yellen, QE, Sam Wardwell | Leave a Comment »
The Current Market Reality: Economic Transitions, Equities & Alternatives
At this year’s Global Investment Forum, the discussion among Pioneer investment professionals was generally positive. Of course, everyone was conscious of the current market reality: that the major force behind recent positive, though benign, market trends is the unprecedented creation of liquidity and extremely loose stance of monetary policies around the world. Monetary policy alone cannot be the only conduit to a new economic model of income growth and job creation. (more…)
Filed under: Equity Market Insights, Fixed Income Market Insights, Giordano Lombardo, Macroeconomics, Mutual Fund Industry, Political | Tagged: alternatives, diversification, economy, fiscal policy, markets, monetary policy, QE, tapering | Leave a Comment »
Weekly Market Report
Observations on the Capital Markets – Week Ended November 15, 2013
- Yellen’s testimony not surprising: Fed has more work to do
- Last week in the capital markets: The allure of currency devaluation
- U.S. economic data: Generally consistent with continuing modest growth
- A sign of sanity from the EPA
- Watching developments in Europe, Japan and China
Yellen’s Testimony Not Surprising: Fed Has More Work to Do
Janet Yellen’s Senate testimony in last week’s confirmation hearings was very dovish and offered no real surprises. She did not signal or hint at any change in Fed policy (it was a confirmation hearing), but suggested that the best way to achieve an exit from unconventional policy is to deliver a stronger recovery . . . and the Fed has “more work to do” to support that recovery. The risk that she will not be confirmed is considered negligible.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell | Tagged: Abenomics, Capital Markets, China, Europe, Fed tapering, Janet Yellen, Japan, QE Tapering, Sam Wardwell | Leave a Comment »
Wardwell’s Weekly Market Report
Observations on the Capital Markets – Week Ended November 8, 2013
- New Fed papers foreshadow a dovish Fed policy under Yellen
- The market rethought its Fed and ECB forecasts
- Q3 “advance” GDP growth was above consensus
- Other U.S. economic news was generally positive . . .
- . . . But scared consumers didn’t borrow or spend
- Watching Europe, China and Japan
New Fed Papers Foreshadow a Dovish Fed Policy Under Yellen
Two new Fed papers presented at the International Monetary Fund (IMF) argue for prompt lobbying for continued aggressive monetary policy, but suggest prompt tapering of quantitative easing (QE) and more emphasis on forward guidance. The assumption is that these papers would not have been released if Janet Yellen intended to push policy in a different direction . . . and they reinforce the message of papers released at Jackson Hole this summer, suggesting that QE wasn’t acting as effective economic stimulus.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell | Tagged: Bonds, Capital Markets, currencies, ECB, emerging markets, Europe, Fed Action, Fed tapering, inflation, Sam Wardwell | Leave a Comment »
Now is a good time to take stock in the current macro environment from a market perspective. Here’s what we think could happen at the end of this year and next year:
Stocks and Bonds
- It’s been a good year so far for equities. The S&P 500 is up around 24% and the NASDAQ is up 30% year to date through 11/5/13.
- High yield bonds represented by the BofA ML High Yield Master II, convertibles bonds represented by the BofA ML All U.S. Convertibles Index and preferred stocks represented by the BofA Adjustable Rate Preferred Securities Index have clearly outperformed investment grade bonds represented by the BofA ML Corporate Bond Master Index.
- High yield bonds are up about 6%. U.S. investment grade bonds, despite the Fed’s wanting to get rates back down, are still looking at roughly minus 1.6% returns .
- The current economic environment has clearly favored the equity markets and instruments linked to equities. (more…)
Filed under: Equity Market Insights, Fixed Income Market Insights, Ken Taubes, Macroeconomics | Tagged: Bonds, Capital Markets, Fed policy, Fed tapering, Ken Taubes, QE Tapering, the Fed | Leave a Comment »