Posted on September 16, 2014 by Giordano Lombardo
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. Continue reading
Filed under: ECB, Equity Market Insights, Europe, Giordano Lombardo, Inflation, Macroeconomics, U.S. Dollar, United States | 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 | Comments Off
Posted on September 10, 2014 by Giordano Lombardo
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
Filed under: ECB, Europe, Fixed Income Market Insights, Giordano Lombardo, Inflation, Macroeconomics | Tagged: Central Banks, deposit rates, ECB, economy, Euro, Euro economy, Europe, Fixed Income, GDP, global growth, inflation, Mario Draghi, monetary policy, QE, sovereign QE | Comments Off
Posted on August 4, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended August 1, 2014
The FOMC met last week, expressed satisfaction and maintained course. While their policy decisions (continue the taper—now $25b—and keep the Fed Funds rate where it is) were no surprise, the language of the Fed statement was tweaked to reflect the continued/continuing improvement in the economy and labor markets (e.g.: “the likelihood of inflation running persistently below 2% has diminished somewhat”). The Fed feels it is accomplishing its goal…so a continuation of policy normalization is appropriate.
At the same time, the Fed statement said “…a range of labor market indicators suggests that there remains significant underutilization of labor resources.” Analysis: the Yellen Fed is moving cautiously…with Japan and Europe still weak, the Fed appears willing to risk an inflationary boom in the U.S. to minimize the likelihood of having to fight a recession and/or deflation when it has a bloated balance sheet and low Fed Funds rate, but very robust tools to fight inflation. As I said on CNBC last week, a submarine commander doesn’t give the order to submerge when most of the hatches are closed.
Filed under: Equity Market Insights, Europe, Fixed Income Market Insights, GDP, Macroeconomics, Sam Wardwell, Uncategorized | Tagged: China, US GDP, economy, Sam Wardwell, Japan, the Fed, labor market, Yellen's Fed, Tipping Point | Leave a comment »
Posted on June 30, 2014 by Sam Wardwell
Observations on the Capital Markets – Week Ended June 27, 2014
Summer, summer, summertime – time to sit back and unwind. The Fresh Prince and DJ Jazzy Jeff might have been talking about the quiet tone last week in the capital markets.
- Can you spell Goldilocks? Stocks, bonds, and commodities all rallied in the first half of 2014…for the first time since 1993.
- Currencies: The Euro and Yen each rose 0.5%-1% against the dollar, extending their gains for the month.
- Bonds: The 10-year Treasury yield fell 9 basis points (bps) to 2.54%; the 10-year TIP yield fell 8 bps to 0.27%.The Bank of America Merrill Lynch High Yield Index (BoAML HY) widened 1 bp to 3.48%. The Japanese 10-year bond fell to 0.55%, a 2014 low. Eurozone bond markets were generally quiet.
- Equities: The S&P 500 Index declined almost imperceptibly last week. Within the index, Utilities and Consumer Discretionary (each up 1.0%) led; media companies rallied when the Supreme Court effectively shut down Aereo. Industrials (-1.7%) lagged; Consumer Staples (-1.3%) and Energy (-0.9%) were also weak. MSCI Europe and Japan were each down 1.5-2%. The MSCI Emerging Markets Index was down a bit.
- Commodities: WTI Oil was down about $1 (1%)…still not really reacting to Iraq. Gold, up 3% last week, gained another $5 (0.5%).
Filed under: Equity Market Insights, Europe, GDP, Inflation, Macroeconomics, Political, U.S. Dollar, United States | Tagged: Capital Markets, currencies, ECB, economy, emerging markets, employment, equity markets, Europe, European markets, Fed Action, GDP, housing, inflation, Japan, Sam Wardwell, Ukraine, US GDP | Leave a comment »
Posted on May 28, 2014 by Sam Wardwell
We’ll start this week with some market trivia – Roughly 150 of the stocks in the S&P 500 yield more than the 10-year Treasury. Continue reading
Filed under: Europe, GDP, Macroeconomics, Sam Wardwell, U.S. Dollar | Tagged: Bonds, Capital Markets, China, currencies, economy, employment, Europe, European markets, Japan, Sam Wardwell | 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 March 25, 2014 by Sam Wardwell
As expected, quantitative easing (QE) was tapered another $10 billion last week and the Fed dropped its earlier guidance that it might start raising the Fed Funds rate when unemployment is 6.5% (confirming that it will wait longer than that, since we’re almost at 6.5%).
The U.S. stock market sold off sharply on this news (even though the outcome was widely expected), then rallied the next day. Some observers think it was computer algorithms that (seeing unexpected hawkishness) triggered the selling; the dip was a buying opportunity. The bond market moved to price in a stronger economy and faster pace of Fed Fund rate hikes.
Filed under: Equity Market Insights, Fixed Income Market Insights, Macroeconomics, Sam Wardwell, U.S. Dollar, United States | Tagged: Bonds, Capital Markets, commodities, currencies, economy, equity markets, Fed tapering, inflation, markets, Sam Wardwell | Leave a comment »