Addressing Investor Concerns: Is China Just Kicking the Can Down the Road?


Volatility in Chinese equity markets has calmed down since the March peak, but for investors a key question remains:  Is it a temporary pause or the calm before a storm? Many investors are under the impression that China is just kicking the can further down the road, and that a new phase of market turbulence is just around the corner. Continue reading

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Emerging Markets: The Worst may be Over

Quarterly Outlook

Mauro Ratto

Head of Emerging Markets

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3 Things the European Investment-Grade Fixed Income Team Talked About Last Week

4538062771. “Sell in May and Go Away”

The above oft-quoted stock market adage suggests that investors should sell their equity holdings in May to avoid a seasonal decline in equity markets. According to the Stock Trader’s Almanac, since 1950, the Dow Jones Industrial Average has had an average return of only 0.3% during the May-October period, compared with an average gain of 7.5% during the November-April period. Nowadays it tends to be used (rather inaccurately) to describe the performance of many other asset classes. But the reaction of markets in the first week of May had many market participants quoting this famous phrase, as a distinct “risk-off” tone took hold and was responsible for some significant movement in asset prices. Generally, there was a reversal of many of the price trends seen since mid-February, as the U.S. Dollar finally found some support against the other major currencies, core bond yields fell and peripheral bond spreads widened, commodities gave up some of their gains, and equity markets declined. What caused this reversal is open to debate – some speculated that it was a delayed reaction to the non-movement of the Bank of Japan the previous week, others suggested the surprise cut by the Reserve Bank of Australia and the lowering of its inflation forecast was responsible, whilst others noted the general weak tone in recent economic data globally. However, there is a common theme running through all the above reasons – the market’s increased belief that central bank policy is becoming more and more ineffectual. Without the help from governments on the fiscal and reform side, it appears that the only effect central bank policy is having is to raise asset prices. This scepticism about central banks’ ability to generate growth and inflation is likely to continue in the short-term, and we believe that being long duration in the U.S. and German, whilst de-emphasizing peripheral European markets is prudent.

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U.S. Fixed Income in a Wave of Unconventional Global Monetary Policy

Quarterly Outlook

Ken Taubes

Head of Investment Management, U.S.

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Is the Turnaround of China’s Economy Real?

518551785Despite strong concerns at the start of the year, we believe that overall economic conditions are stabilizing, backed by a more aggressive policy stance, better fiscal supports, recovery of the real estate sector and credit growth, while consumers and the private sector have remained relatively resilient. Tail risks of a hard-landing in the near term are easing meaningfully. Continue reading

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