Last Wednesday, the SEC approved amendments on money market fund (MMF) rules. My colleague, Seth Roman, a portfolio manager who specializes in the sector, summarized the areas of reform as they relate to institutional and retail money market investors. I thought I’d share that with you here.
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
Filed under: Contributors, ECB, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Inflation, Macroeconomics, Mutual Fund Industry, Political, Sam Wardwell, U.S. Dollar, United States | Leave a comment »
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
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 »
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.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Inflation, Macroeconomics, Sam Wardwell | Tagged: Banco Espirito, Capital Markets, consumer spending, labor market, Sam Wardwell, the Fed, Unemployment | Leave a comment »
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.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, Macroeconomics, Sam Wardwell | Tagged: Capital Markets, Central Banks, ECB, Europe, Sam Wardwell, World Cup, World Cup Syndrome | Leave a comment »
Observations on the Capital Markets – Week Ended June 20, 2014
Iraq news didn’t spark a flight to safety and it’s not yet clear whose side we’re on (or should be on). Fed policy seems to be on autopilot, which the markets interpret as dovish. As expected from last week’s FOMC meeting, there was no change to the taper pace or rate policy. The statement’s wording and forecasts were tweaked only slightly from the previous. Higher inflation readings and stronger labor market data didn’t lead to a material change in the language. For the Fed to react so little to the labor and inflation data apparently led “the market” to think the Fed is even more dovish. The market apparently expects the Fed to be even more dovish than the Fed expects to be. December Fed Fund futures are trading around 1.75%‑well below the Fed’s 2.5% projection. Continue reading
Filed under: Contributors, ECB, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Inflation, Macroeconomics, Political, Sam Wardwell, U.S. Dollar, United States | Tagged: China, economic indicators, government policy, U.S. unemployment | Leave a comment »
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 »
Market and economic news last week was busy and upbeat. In the capital markets, U.S. Treasuries and gold sold off, but everything else went up. On the global economic front, there were plenty of positive signs as well.
Here are a few highlights:
1. The U.S. economy continues to expand
The Fed’s Beige Book confirms that the economy no longer needs extraordinary support from the Fed. The report showed the economy continuing to expand and the labor market continuing to improve. The pace of growth was characterized as “moderate” in seven districts and “modest” in five – a broad and robust economic recovery (weak nowhere).
Filed under: ECB, Equity Market Insights, Europe, Fixed Income Market Insights, Macroeconomics, Sam Wardwell | Tagged: Capital Markets, Central Banks, ECB, Europe, Fed Action, Giordano Lombardo, Sam Wardwell | Leave a comment »
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 »