Featured Market Outlook
There continues to be value in credit
After a very challenging start of the year, the credit rally since mid-February, briefly interrupted by the Brexit rollercoaster, has been nothing short of remarkable. Despite healthy year-to-date returns, however, the rally has only taken valuations back to what we would consider attractive levels given our macro outlook and credit fundamentals.
There's much in the global economy that defies expectations; for ClearBridge co-CIO Hersh Cohen, the answer is to stay focused on solid assets with the potential for stable or rising dividends, as well as diminished volatility.
Municipal bonds outperformed their taxable counterparts in the second quarter and Western Asset still has a somewhat optimistic outlook for the sector going forward.
Chuck Royce and Francis Gannon discuss why the combination of earnings and valuation could bolster small-cap value’s leadership in the current cycle.
Fresh perspective on the UK/EU divorce:
Highlights from our June 29 London roundtable -- offering fresh perspective on the unfolding realities surrounding Britain's vote to leave the European Union.
Improving US economic data and the formation of a new UK government led by Theresa May boosted spread sectors, especially UK corporate bonds. Volatility in global bond markets fell over the past five trading days, following the shocks created by the UK’s June 23 decision to leave the European Union (EU). Traditional safe-havens, such as long US Treasury bonds, gave up some of their recent gains, while German and Japanese sovereign bond yields rose, although they still trade at negative levels.
Western Asset continues to be cautiously optimistic that global growth will hold up, but is cognizant that Brexit has introduced new uncertainties. Western’s central theme remains that favorable valuations, strong fundamentals and reasonable growth are a powerful backdrop for credit.
Mid-week Bond Market Update:
Developed market sovereign bond yields extended the rally started on June 23, when the UK voted to leave the European Union (EU). Supported by hopes of further global central bank easing to tame the effects of the vote, US, German and Swiss bond yields, among others, reached fresh record lows.
Brexit's main economic risk may be to the British economy, but beware the potential knock-on effect of a stronger US dollar, notes Francis Scotland of Brandywine Global.
The UK has voted to leave the EU, a historic decision that will reshape and continue to send shocks through the market. Andrew Belshaw, Head of Investment Management, London, discusses the political and economic implications, as well as what this means for European bond markets and currencies, and the US and global markets.
"Brexit" vote update:
The UK has voted to leave the EU -- unleashing a wave of uncertainty into the markets as investors react to the potential consequences. See what our managers think might be next for investors and the global economy.
Western Asset CIO Ken Leech says that global recovery remains intact, albeit fragile, despite a tumultuous first quarter.
Mid-week Bond Market Update
The weakest US jobs report in almost six years has fueled global bond markets since the data became available on Friday. Prospects of continuous central bank support, via loose monetary policies, lifted global sovereign debt, with the benchmark German 10-year yield falling to a record low of 5 basis points (bps), and its US counterpart down to 1.7% last Friday, from 1.86% just the week before.
Why did global high yield prices recover so quickly in February and March? The Fed's shift to a more cautious approach was a major factor — and will likely drive valuations over the next year or more.
A Fed rate hike could set back the quest for more global growth and inflation; Western Asset CIO Ken Leech explains why.
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