Posted on February 24, 2014 by Giordano Lombardo
Pioneer Investments’ Head of Global Asset Allocation Research, Monica Defend, assesses the progress of Abenomics – the series of economic reforms implemented by the government of Prime Minister Shinzo Abe – and discusses her outlook for the Japanese market.
What has the new policy course known as Abenomics achieved and what is yet to be done?
Japan managed to exit a long stagnation, also marked by deflation, thanks to aggressive monetary expansion. That was probably the easy part of Abenomics, as it got a major implicit endorsement from the U.S. Federal Reserve; Japan’s quantitative easing accounted for an even larger part of GDP than the U.S. version, but had the Fed not led the way with quantitative easing, we have legitimate doubts that it would have been as effective.
Filed under: Equity Market Insights, Fixed Income Market Insights, Giordano Lombardo, Macroeconomics, Political | Tagged: Abenomics, Giordano Lombardo, Japan, Japanese economic reforms, Monica Defend, Shinzo Abe | Leave a comment »
Posted on February 10, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended February 7, 2014
The jobs reports were better underneath than on the surface
The data: Initial unemployment claims for the month were 331K. The “establishment survey” showed headline employment growth of 113k, below consensus expectations of 189k. The details were less disappointing, however.Prior months were revised up by 34k. Wages continued to rise slowly. The household survey — the basis for calculating the unemployment rate — showed employment rising by 616k. But because the labor participation rate rose 0.2 to 63.0%, the estimated workforce rose by 499k and the unemployment rate fell only to 6.6%.
The upshot: The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) fell by 514k (so, by implication, the number of full-time workers rose by 1.1 million!). Finally, we got the periodic revisions to the past year’s data, the net effect of which was to revise 2013 job growth up from 2.19mm to 2.32mm.
Comment: There’s often a pretty big divergence between the “household” and “establishment” surveys. It’s not unusual to have discrepancies . . . they tend to vary month-to-month but converge over time. Continue reading
Filed under: Contributors, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Mutual Fund Industry, Political, Sam Wardwell, U.S. Dollar, United States | Tagged: CBO, employment, Obamacare, Unemployment | Leave a comment »
Posted on January 28, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended January 24, 2014
- In the U.S.: Few surprises in economic data, though the debt ceiling looms
- In Europe: Better economic data, but the credit crunch persists
- In China: GDP growth is on track, but offshore investors watch PMI
- In Japan: All eyes will be on wages – will they rise?
- In Argentina: devalued currency
Last week the IMF raised its 2014 global growth forecast from 3.6% to 3.7%. The U.S. growth forecast rose from 2.7% to 2.8%, Eurozone from 0.9% to 1.0% and China from 7.2% to 7.5%. Here’s a closer look at some of the developments influencing the global economies and markets:
In the U.S.: Few Surprises in Economic Data, though the Debt Ceiling Looms
The debt ceiling will take center stage in Washington, as Treasury Secretary Jack Lew said the government will run out of cash around the end of February if the debt limit (scheduled to be reached Feb 7) isn’t raised (and if tax refunds are sent out on time). The White House wants a “clean” increase; Republicans want something in return for an increase … neither side wants a default.
Filed under: Europe, GDP, Macroeconomics, Political, Sam Wardwell, United States | Tagged: Bonds, Capital Markets, Central Banks, China, emerging markets, Europe, European markets, Fed tapering, GDP, Sam Wardwell | Leave a comment »
Posted on January 6, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended January 3, 2014
Extended unemployment benefits stopped for 1.3 million people at year-end. This doesn’t change their employment status . . . they just stop getting unemployment compensation. Extended benefits (of up to 99 weeks) was part of the recession-fighting fiscal stimulus package. A question was: did this create a dis-incentive to find a job (aka “funemployment”). Continue reading
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Political, Sam Wardwell, United States | Tagged: benefits extension, funemployment, Unemployment | Leave a comment »
Posted on December 27, 2013 by Paresh Upadhyaya
I recently participated in a webinar where I was asked a few questions regarding the U.S. dollar and Japan, which I think are on many people’s minds right now. I wanted to pass along my thoughts on both subjects.
What are the chances of the U.S. dollar losing its reserve currency status and what might replace it? Continue reading
Filed under: Europe, GDP, Political, U.S. Dollar, United States | Tagged: Central Banks, currencies, ECB, Europe, Japan | Leave a comment »
Posted on December 26, 2013 by Giordano Lombardo
In a recent conversation, my colleague Mauro Ratto, Head of Emerging Markets, helped boil down China’s recent economic reform plan.
China’s “Breakthrough” in the Making
The ruling communist party’s gathering (also known as Plenum) in early November was followed closely by the expected announcement of a major plan of economic reforms. Three major reforms that were highlighted during the plenum concerned:
- State-Owned Enterprise Reform (SOEs)
- Financial Sector Reform
- Social Reform Continue reading
Filed under: Giordano Lombardo, Macroeconomics, Political | Tagged: China, china's economic reform, economic reform, emerging markets | Leave a comment »
Posted on December 23, 2013 by Sam Wardwell
Observations on the Capital Markets – Week Ended December 20, 2013
Developed market stock markets had generally traded down in the first two weeks of December; they were up strongly last week, catalyzed by the Fed announcement it would begin tapering its monthly bond purchases de-signed to spur growth and employment.
The S&P 500 and MSCI Japan indices were each up 2%; MSCI Europe index was up 3%. Within the S&P 500, In-dustrials and Materials led; Telecoms and Consumer Sta-ples lagged as cyclicals continue to outperform defensives in December. The Fed decision powered the dollar to gains of roughly 1% against the Yen and 0.4% against the Euro (the Yen fell to a five-year low against the dollar).
Bonds seemed to take the Fed’s actions in stride, although high yield bond spreads, as measured by the BofA ML High Yield Master II Index, narrowed 8 basis points to 404, a new cycle low. That’s more than the economic news would seem to justify—but it’s consistent with the stock market’s positive action.
European and Japanese bond markets were quiet, but China’s money markets are experiencing a liquidity crunch—generally thought to be cyclical (year-end) noise, but spill-over effects are possible. Oil continues to rise off its end-November bottom, rising 3% to just below $100. Gold was down 3% (Fed tapering), falling to below $1,200. Continue reading
Filed under: Contributors, Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Political, Sam Wardwell, United States | Leave a comment »
Posted on December 19, 2013 by Sam Wardwell
The Fed’s taper announcement might have been its most closely watched announcement of all time. We pretty much knew what was basically going to happen (eventually taper QE, strengthen forward guidance), we just didn’t know exactly when and exactly how much. Now we know.
The Fed will reduce its bond purchases from $85 billion/month to $75 billion/month in January. In the Q&A, Bernanke suggested purchases might be cut another $10 billion at each upcoming FOMC meeting — implying the program would end in late 2014. It also strengthened “forward guidance”, saying it would keep the Fed Funds rate at current levels “well past the time that the unemployment rate declines below 6.5 per cent.”
Immediate market reaction: good news is good news Continue reading
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Political, Sam Wardwell | Tagged: impact of Fed Taper | Leave a comment »
Posted on December 17, 2013 by Mike Temple
This time last year we were bullish about equities and positive on the slow but steady strengthening of the economy. The market did not disappoint. The economy was almost heroic, you might say, with its performance enduring government sequestrations and higher taxes almost a 2% drag on GDP but comporting with our expectations of 2 – 2.5% growth. 2013 is ending with GDP and the markets coming fairly close to what we thought they’d achieve. Now the year is almost out, so let’s take stock of 2013 but look ahead to 2014. Continue reading
Filed under: Contributors, Equity Market Insights, Fixed Income Market Insights, GDP, Macroeconomics, Mike Temple, Political | Tagged: 10-year Treasury Yield Expectations, U.S. 10-Year Treasury Yield Expectations | Leave a comment »