Celebrate Good Times, Come On!

514657849Last week the markets celebrated a dovish message from the Fed. The Fed says it is neither “patient” nor “impatient”… but doves were pleased. You can find the reaction of Pioneer’s Chief Investment Officer, U.S., Ken Taubes in his recent post (Dovish Fed Resets Outlook for Risk Assets). My additional observations are below.

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Dovish Fed Resets Outlook For Risk Assets

United States federal reserveThe market’s initial reaction to Wednesday’s FOMC meeting was consistent with a dovish interpretation. U.S. Treasury yields declined and the dollar underperformed. However, as market participants digest the information, much of the initial moves have been retraced.

Following the meeting on March 18, investors reset their expectations of rate hikes in coming meetings: from March 12 to March 19, the market-implied probability of a June hike fell from 20% to 12%, and of a September hike fell from 53% to 42%, while the probability of a rate hike in October increased.

The notable highlights in the announcement were the removal of “patient” from the FOMC statement, and the lowering of their median forecast for the Fed Funds rate. We believe the removal of the “patience” wording suggests that a rate increase in the June or September period is likely. Furthermore, the exclusion of the word “patient” allows the Committee to respond quickly to any upside surprises in employment or inflation. Even as the Committee has moderated its forecast of appropriate rates, it has removed self-imposed constraints on action.

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Who Buys Bonds With Negative Yields?

180435843As part of the European Investment Grade Fixed Income team, some very common questions we are asked as we meet investors and clients are; why would anyone buy a bond with a negative yield? Why buy a bond that is guaranteed to lose money if held to maturity? Continue reading

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ECB QE Dominated Headlines – But Oil’s Drop was Bigger than Euro’s

Illustration of a statistics boardAs the European Central Bank’s Quantitative Easing Program started last week, the euro fell roughly 3% against the U.S. Dollar, Yen and Yuan, which were all roughly flat against each other. The euro, which had fallen from $1.21 at year-end to $1.12 at the end of February, is now down to $1.05. At the same time, oil prices cracked. WTI crude prices, which held at just above $50 in February, broke down last week, falling to below $45. Production and inventory data gave no hints that the oversupply situation will end soon.  Continue reading

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U.S. Update: Broad-Based Economic Growth

453612361In a recent report, Pioneer Investment’s Global Asset Allocation Research team, led by Monica Defend, updated their outlook for the U. S. economy in 2015. A few key insights from that report follow. To read the full report, please click here.

Improving Economic Growth

We have revised our growth outlook upward for 2015 to 3.8% (from 3.4%), somewhat above the consensus, and inflation to 0.1%, only marginally below the consensus. Continue reading

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