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.
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.
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.
Q4 Market Commentary
Continuing global expansion is the priority for policymakers worldwide; steps are being taken in the right direction so far.
Chart of the Week
Chart Courtesy of Western Asset Management. Source: U.S. Bureau of Labor Statistics, as of Nov 30, 2018. 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
China’s growth figures were unexciting, but the trade picture may be improving; U.S. consumers spent well in November; Mario Draghi stuck to the ECB’s plan, but didn’t sound cheerful about it.
None of the five early warning indicators tracked by Western Asset point to an end of this expansion phase of the economy.
Market and Strategy Update
Our thought now is that the optimism for US growth is a bit overdone and pessimism around lethargic global growth rates has swung too far to the downside.
Western Asset examines recent trends in the muni bond market and provides its outlook about conditions ahead.
Fixed income update
While we don’t see this credit cycle ending soon, its longevity does warrant extra scrutiny on valuations and some types of of risk.
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.
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).
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.
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