Posted on July 17, 2014 by Giordano Lombardo
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
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Giordano Lombardo, Inflation, Macroeconomics, United States | Tagged: Bonds, Corporate Profits, Fixed Income, Market Bubbles, rising interest rates, Valuations | Leave a comment »
Posted on June 25, 2014 by Giordano Lombardo
Pioneer’s Head of Global Asset Allocation Research, Monica Defend, recently released an in-depth macro report on Emerging Markets. Here are some of her updates on EM monetary policies. You will find a link to the full report at the end.
- China - The implementation of fiscal reform is proceeding as ten local governments will be allowed to issue bonds with full responsibility of repayment. Even though the economic slowdown would suggest a stronger monetary easing, in the ongoing process of liberating interest rates and increasing efficiency in credit allocation, monetary policy must remain prudent to prevent a return to the old model of allocation and growth. The latest reserve requirement ratio cut for some qualified banks supports this attitude of the People’s Bank of China.
Filed under: ECB, Europe, GDP, Giordano Lombardo, Inflation, Macroeconomics | Tagged: Asia, Brazil, Central Banks, China, emerging markets, Latin America, monetary policy | Leave a comment »
Posted on June 11, 2014 by Giordano Lombardo
Yerlan Syzdykov, Head of Emerging Markets Bond & High Yield here at Pioneer Investments, recently shared his thoughts with London’s press on the challenges of investing in emerging market debt. I thought I would share them here with you as well. The following is a summary of his remarks:
Filed under: Fixed Income Market Insights, Giordano Lombardo, Macroeconomics | Tagged: Capital Markets, corporate debt, emerging markets, emerging markets challenges, Giordano Lombardo, opportunity, QE, Yerlan Syzdykov | Leave a comment »
Posted on June 10, 2014 by Giordano Lombardo
We are fully aware that it is not easy to make short-term macroeconomic forecasts, especially after a financial crisis with the potential to bring long-term headwinds to the economy. The Great Financial Crisis left many legacies. There was the deleveraging phase (as investors paid off debt) that typically follows credit/real estate bubbles. And, there were many dislocations in the job market and in the investment cycle, as well as distortions created by an excess of regulation. Continue reading
Filed under: ECB, Europe, Giordano Lombardo, Macroeconomics, United States | Tagged: Central Banks, credit markets, debt, ECB, economic cycle, financial crisis, inflation, monetary policy | Leave a comment »
Posted on June 5, 2014 by Giordano Lombardo
At their monthly meeting today, the European Central Bank (ECB) announced a number of measures, aimed at preventing a “negative spiral…between low inflation, falling inflation expectations and credit, in particular in stressed countries”.*
Our initial impression is that these measures were anticipated by the market and therefore should not lead to major shifts in sentiment. The news is good for peripheral economies and assets, but the bar to outright quantitative easing (purchases of government bonds) has probably risen. The cut in the refinancing rate was also well-anticipated by the market, despite some marginal disappointment that the rate cut wasn’t 15bps. Apart from benefitting mortgage holders in certain countries whose loans are linked to the ECB rate, this move is largely symbolic, and in our view is unlikely to have a significant impact on economic activity or inflation rates. The deposit rate cut was also anticipated by markets.
Filed under: ECB, Europe, Fixed Income Market Insights, Giordano Lombardo, Inflation, Macroeconomics | Tagged: Capital Markets, ECB, Europe, Fed tapering, Giordano Lombardo, inflation | Leave a comment »
Posted on June 4, 2014 by Giordano Lombardo
Despite an uptick in volatility and spreads, Russia remains an important market for investors. For fixed income, the recent widening of spreads that followed the country’s intervention in Ukraine may represent an opportunity. For equity investors, these events highlight an increasingly complex outlook that may or may not offer opportunity at current levels. Continue reading
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Giordano Lombardo, Macroeconomics, Political, United States | Tagged: Russia, Urkaine | Leave a comment »
Posted on May 13, 2014 by Giordano Lombardo
The last decade may well be remembered as the golden era for Emerging Markets (EM). These economies emerged from the crisis of the 90s and experienced a success story of restructuring and strong growth early in the millennium. Cheap labor markets and massive capital inflows, along with extraordinarily loose monetary policies put in place globally to fight recession, were behind the EM renaissance. Continue reading
Filed under: Equity Market Insights, Fixed Income Market Insights, Giordano Lombardo, Macroeconomics | Tagged: Capital Markets, Central Banks, China, emerging markets, Giordano Lombardo, QE Tapering, tapering | Leave a comment »
Posted on April 16, 2014 by Giordano Lombardo
The Eurozone economy is showing more convincing signs of a pick-up that is more broad based and robust than anticipated. Obviously, a wide difference in conditions exists between European countries and fragmentation in their financial conditions still exist, but these are (slowly) receding. We recently examined trends in three elements of Eurozone health: growth, inflation and the European Central Bank.
Growth: Improving Momentum
Filed under: ECB, Europe, GDP, Giordano Lombardo, Inflation | Tagged: Central Banks, ECB, economy, Europe, European markets, Eurozone, GDP, Giordano Lombardo, inflation, Interest rates | Leave a comment »
Posted on April 8, 2014 by Giordano Lombardo
We believe U.S. economic data supports sound conditions for the economy in 2014, with no major imbalances appearing. Some figures, weaker than expected in the first weeks of the year, are mainly the result of exceptional weather conditions. The transition towards a self-sustained recovery is supported by strengthening internal demand, driven by recovering capital expenditure and household consumption. We expect to see mixed signals coming from economic activity indicators and labor market as the economy normalizes, but we do not expect the trend in the main drivers of growth to be derailed.
Our growth estimates for 2014:
- U.S. GDP growth of 2.8%.
- Personal consumption estimated to grow at a moderate pace and then accelerate in the second half of the year.
- Inflation expected to remain below 2% but step up gradually during the year.
- Non-Residential Investments to accelerate in the second half of the year, giving momentum to acceleration in capital expenditures.
- The Fed will continue to taper its bond buying program which will be effectively wound down by the end of 2014 if its current economic projections hold.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Giordano Lombardo, Macroeconomics, U.S. Dollar, United States | Tagged: economic forecast, employment, inflation housing, personal consumption, U.S. Economy | Leave a comment »
Posted on April 1, 2014 by Giordano Lombardo
In the last five years, we have seen an increasing appetite for risky assets. Initially, this was a consequence of the search for yield and enhanced returns in a low interest rate environment. More recently, it has translated into a deeper exploration of yield opportunities on the riskier side of risky assets (such as high-yield bonds and small-cap stocks). Now, with equity markets close to all-time highs and credit spreads at historical lows, we must ask ourselves two questions: Continue reading
Filed under: Giordano Lombardo, Macroeconomics | Tagged: Capital Markets, China, diversification, emerging economies, Eurozone, Giordano Lombardo, global growth, risky assets, US GDP | Leave a comment »