The Fed’s statement from its meeting last week contained few surprises but was slightly hawkish on a close reading. “Don’t fight the Fed” has been good advice in the past. Maybe it’s different this time. Maybe not. The year-end 2015 and 2016 “dot plot” forecasts for rates rose roughly 0.25% amidst slightly lower growth and inflation forecasts. Moderate economic growth continues, but homebuilding is not looking like a big GDP growth driver in 2014, yet inflation remains low, and there is little pressure on the Fed to hurry. Its balance sheet won’t shrink anytime soon, however. Continue reading
Economic fundamentals (the “real economy”) have been struggling to catch up with the buoyant behavior of financial markets and, eventually, these diverging patterns (gaps) will have to be reconciled. On the economic side, the main global structural imbalances (a mountain of debt, a lack of aggregate demand) remain very much in place and the multiple transitions that all the major economic areas are facing are far from being completed. The recent market dynamics would be inconceivable in a “normal” market cycle, but nothing is impossible in the fantastic world of Quantitative Easing (QE) and money printing. Central banks will continue to play a key role in financial markets. However, we believe that their actions will likely be less effective than in the past as they have almost exhausted the firepower of their unconventional policies. Continue reading
Posted in Economy, Equity
Tagged Abenomics, Central Banks, China, debt, deflation, ECB, economy, emerging markets, equity markets, Europe, European markets, Eurozone, India, inflation, markets, QE, QE Tapering, Slow growth
Last week in the capital markets: Bonds sold off globally in the week before the Fed meeting.
It was a quiet week for economic news, and the geopolitical front was relatively quiet (less fighting but more sanctions in Europe, moving toward a bigger effort against ISIS) but fears that the Fed is behind the curve seemed to be the ones that led investors and traders to act last week. Continue reading
Posted in Economy, Equity, Fixed Income, Markets
Tagged Bonds, Capital Markets, currencies, ECB, economy, emerging markets, Fed Action, inflation, Interest rates, US GDP
In 2013, the governments of Scotland and United Kingdom passed the Scottish Independence Referendum Bill inviting all United Kingdom residents living in Scotland and aged 16 and over to vote on the referendum question: “Should Scotland be an independent country?” On September 18 2014, 4.3 million registered voters will vote “Yes” or “No” on Scottish independence. A simple majority is required to gain independence. Monica Defend, Pioneer’s Head of Global Asset Allocation Research, provided the summary that follows … Continue reading
Attended by the world’s top central bankers, the European Central Bank (ECB) met in August for its regular monthly meeting in Jackson Hole, Wyoming. I thought I would share some insights from Tanguy Le Saout, Pioneer’s Head of European Fixed Income.
Anticipation was running high that the ECB would announce further measures to help tackle Europe’s twin problems of low growth and falling inflation. In a surprising move, ECB President Mario Draghi, deviated from his prepared speech. These and other unscripted remarks appeared to signal a significant shift in ECB policy. It raised hopes for the imminent announcement of a Quantitative Easing (QE) program and caused a substantial fall in European bond yields and the euro currency. With expectations high, did the ECB deliver? Continue reading
Posted in Economy, Fixed Income, Markets
Tagged Central Banks, deposit rates, ECB, economy, Euro, Euro economy, Europe, Fixed Income, GDP, global growth, inflation, Mario Draghi, monetary policy, QE, sovereign QE