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Chart of the Week

Source: Bloomberg, as of 8/15/16. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.

 

EM Debt: Back in the Saddle

Emerging market debt has come on strong this year and is well ahead of most other major bond sectors for the year-to-date period

Market Snapshot

When Doves Try...

More mixed signals from the Fed:

Minutes from the July FOMC meeting revealed little consensus for a rate hike in September; new data suggest that Abenomics’ “three arrows” may be falling short; and three reasons that S&P 500 earnings could improve later this year.


Insights

Market Outlook
Aug 24

Mid-Week Bond Update

Seeking clarity in Jackson Hole

The central bank and oil price supported global bond rally continued yet another week, this time leaving behind some Emerging Markets (EM), which suffered from a rising US dollar and political tensions in South Africa and Turkey. All eyes, however, are focused on Friday’s central banks’ gathering in Jackson Hole, Wyoming, where investors expect US Federal Reserve (Fed) chair Janet Yellen to shed some light on future policy actions. While some anticipate an interest rate hike later this year, on the back of an improvement in labour and wage data, others expect the Fed to focus even more on inflation – or the lack of it. This makes some investors question whether a hike is warranted at all. Different messages from Fed officials, some more cautious than others, have kept US rates at bay over the summer as investors wait for clearer signals.

Market Snapshot
Aug 19

More mixed signals from the Fed:

When Doves Try...

Minutes from the July FOMC meeting revealed little consensus for a rate hike in September; new data suggest that Abenomics’ “three arrows” may be falling short; and three reasons that S&P 500 earnings could improve later this year.

Market Outlook
Aug 17

Mid-Week Bond Update

US-UK inflation: oceans apart

The post-Brexit risk rally continued for most Fixed Income asset classes over the past five trading days, but this time supported by a jump in oil prices, rather than central bank talk of further monetary easing. The technique was similar, though: officials from oil producing countries talked up the sector, highlighting the need to control the present supply glut. West Texas Intermediate surged to US$46.5 per barrel, up from $42.7 last week. Currencies of oil-exporting Emerging Markets (EMs) rallied, including the Colombian peso and the Norwegian krone.

Market Snapshot
Aug 12

How will this affect the Fed?

US retail: Not buying it

Retail sales for July disappointed, with auto sales the only major category making up for contraction in the others. Financial markets, however, focused on the impact of the shortfall on the Fed's September rate decision. Meanwhile, Germany issued more zero-coupon notes priced above par, and Brazilian President Rousseff's impeachment grew increasingly likely.

Market Snapshot
Aug 05

More signs of growth. Rate hike ahead?

US jobs: Nice work

July's US employment report was a solid win in just about every category, rekindling speculation about a Fed rate hike as early as September. Meanwhile, the Bank of England cut rates and more than doubled its bond-buying, and Europe's banks pondered the results of one of its regulators' latest stress test.

Market Outlook
Aug 05

Unconstrained bond investing:

Not Running on Empty

Unconstrained strategies may be suitable in an environment where global growth is facing stronger headwinds, market volatility is on the rise, and challenging markets require greater flexibility. They have no formal benchmark and comprise exposures of various asset types that have differing risk budgets.

Market Outlook
Aug 04

Mid-Week Bond Update

Out of Japan

Emerging Markets rallied over the past five trading days, supported by waning prospects of a US rate hike and a weakening US dollar. Expectations of higher US rates changed following a disappointing 1.2% second-quarter growth rate, which helped drag down the greenback against most developed market currencies. The US dollar, however, strengthened against commodity exporters such as Colombia, Russia and Mexico, as they suffered from the continuous slide of oil – the West Texas Intermediate (WTI) contract traded under US$40 per barrel for the first time since April. Japan experienced its worst bond sell-off in three years as investors fear the central bank can’t do more to reignite growth and inflation, following years and billions of yen in trying to do so. In Europe, banks suffered despite a generally positive regional Stress Test report on concerns that some institutions still need to raise capital. Europe’s inflation expectations fell.

Market Outlook
Aug 01

The big picture in bonds:

Market and Strategy Update

With further accommodation from central banks likely, Western Asset CIO Ken Leech believes spread sectors should continue to offer attractive returns, with Treasuries and sovereign bonds underpinned by low rates.

Market Snapshot
Jul 29

Look behind the headlines

US GDP: The angel's in the details

The disappointing headline GDP for 2Q masked underlying consumer and industrial strength; look for upward revisions in subsequent estimates. Meanwhile, the Bank of Japan held back on further stimulus, perhaps pinning hopes on fiscal expansion. In Europe lending is finally picking up; is growth around the corner?

Market Outlook
Jul 29

An upturn in growth ahead?

Despite the economic pessimism now impacting valuations in global bonds, Brandywine Global's David Hoffman and Steve Smith perceive opportunity in developing markets in the 2nd half of 2016.

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