While the Fed is expected to hike rates twice more this year, the potential removal of the word “accommodative” from its guidance would be a more notable development.
Western Asset examines recent trends in the muni bond market and provides its outlook about conditions ahead.
Various Federal Reserve (Fed) policymakers expect US inflation to accelerate in 2018, and market analysts generally agree with them. Of course, these same folks predicted rising inflation in previous years as well. It didn’t happen then, and we think it is unlikely to happen in 2018.
The big picture in bonds
The slow but steady recovery since the financial crisis continues to make progress; looking ahead, we expect another 2+% growth year in 2018, perhaps better with the new tax law. The fundamental investment backdrop is exceptional, but prices are high -- so sector and security selection remain key.
In this Q&A, Western Asset Portfolio Manager and Research Analyst John Bellows discusses the outlook for growth and inflation, the impact of recent tax cuts, the maturity of the current business cycle and where to find value in the market when everything seems expensive. Read more.
Chart of the Week
Source: Bloomberg, October 12, 2018. *Forward P/E values are based on Bloomberg Estimates Earnings Per Share. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.
Chart of the Week
Last week's markets left investors looking to economics for clues; Italy faced up to the EU; China's trade surplus ballooned
The Emerging Market (EM) bear market could provide resplendent valuation opportunities. In our view, valuation and fundamentals will carry the day. The key to our prognosis: continuation of sustained moderate global growth.
Key reasons why Western Asset maintains its long duration position
A timely reminder about what really drives fixed-income returns and where the opportunities lie. In short: never underestimate the power of income.
Despite the market spillover from developed market rate volatility, Western Asset does not view the recent market rout as sufficient basis to steer away from Emerging Market debt (EMD).
Third Quarter Outlook
Western Asset CIO Ken Leech surveys the state of global bond markets, sharing views on growth, inflation and the impact of trade and monetary policy.
What you need to know about environmental, social and governance investing
Quarterly Market Commentary
Optimism for a synchronized global recovery has given way to anxiety over potential EM or European crises. While our viewpoint remains optimistic, taking into account the vagaries of downside risks is crucial.
The May FOMC minutes reaffirmed our view that the Fed’s reaction function will be less hawkish than feared.
Investors define ESG in a variety of ways and have different reasons for adopting ESG.
Figures for April indicate that far from taking off, as many believe, U.S. inflation is stabilizing and could even fall.
Market & Strategy Update
Despite the fairly meaningful downshift in growth and inflation, we still believe that the global recovery will be ongoing but could take a very long time to gain traction – even with the help of continued accommodative monetary policy.
Western Asset sees the US dollar succumbing to the gravitational pull of cyclical and technical forces that should bolster the appeal of non-US currencies; the current dollar strength is not the start of something more permanent.
The Western View
Today, fears dominate the financial news, and we have a slightly more cautious tone overall. Yet despite prevalent fears, we remain bullish on several sectors within fixed income – and continue to see opportunity.
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