Inflation may stay subdued, but should move above the levels implied by current breakeven inflation rates once it's apparent that economic recovery has begun.
Despite challenges posed by COVID-19, we believe overall municipal fundamentals remain intact -- and that attractive relative valuations will increase demand when volatility subsides.
Insight on Rates
With negative interest rates already in place in Japan and Europe, it’s only a matter of time before they reach the US.
Q4 Market and Strategy Update
With core inflation below even our more dovish estimates, we expect global growth to remain low by historical standards -- but also resilient.
Focus on the Economy
Despite widespread worries about the yield curve, what we've seen recently is not a true inversion. But preventing that from occurring is one reason the Fed could move to lower rates later this year.
Chart of the Week
Chart inspired by ClearBridge Investments. Source: Bloomberg, as of March 19, 2020. 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
The collapse in oil prices has added to market dislocations and uncertainty associated with the coronavirus pandemic.
The Fed's moves to address liquidity issues in the Treasury market appear to be having the intended effect -- but pockets of concern remain.
Our base case: a sharp decline in Brazil's GDP followed by a rebound heading into 2021.
The Fed policy initiatives introduced in recent weeks together represent a game-changer for the economy -- in ways that go beyond what you might think.
The facilities the Fed put in place span three key investment types: repos, US Treasury securities and commercial paper. We believe more support is still to come.
Banks and COVID-19
Investors seem very bearish on global banks, as if expecting a 2008-type financial crisis to return in the near term. Yet banks are in a very different place now thanks to strong fundamentals.
We currently expect the eurozone economy to shrink by around 1% in 2020, taking into account monetary and fiscal policy responses to reduce the damage.
As volatility increases, US fixed income investments backed by high-quality mortgage and consumer loans may potentially provide strong risk-adjusted return outcomes.
Fixed income review
The global energy sector is facing a period of lower realized prices, uncertainty, and rising leverage.
Zero rates arrive in U.S.
The zero interest rate policy announced by the Fed on Sunday will likely be here for a while -- and could continue even after COVID-19 concerns have moderated.
Volatility in context
Putting the recent volatility in fixed income into historical perspective.
The COVID-19 outbreak
The European response to the economic fallout from COVID-19 is likely to focus more on fiscal policy than rate-cutting.
The Fed's surprise rate cut has implications for markets, the economy and future policy, with the final outcomes hinging on the path of the COVID-19 impacts in the U.S.
Indiscriminate selling driven by virus fears may be a prime opportunity to take advantage of price dislocations, while helping to restore much-needed common sense around valuations.
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