Neuberger Berman

Despite challenges, we maintained a slightly overweight view on lower volatility and directional hedge funds; meanwhile certain areas within private debt appear attractive.

So far, 2016 has been characterized by stomach churning swerves in market direction with little actual change in levels.

The markets had a great run until last August—years of rising prices across nearly every asset class. Unfortunately, long-term investing doesn’t stay that easy.

A dedicated sector classification gives real estate securities the recognition they deserve.

Geopolitical events have been occupying the attention of investors, but without much effect on markets.

A spiral into deeper negative rates is off the table for now.

While equity volatility at the start of the year prompted handwringing among many investors, one of the most vexing issues in the current environment is in the fixed income market.

New rules about how you can claim Social Security benefits will take effect on April 30 as a result of the Bipartisan Budget Act of 2015. The changes are intended to close perceived loopholes in the system that gave rise to popular strategies for maximizing benefits that potentially were worth thousands of dollars in additional income each year. Importantly for some soon-to-be retirees, taking advantage of one commonly used option—the file-and-suspend strategy—requires action soon.

In the old days, they said that when March comes in like a lamb it goes out like a lion. The proverb is rooted in the reality that, in the northern hemisphere at least, this month’s weather tends to be changeable and unpredictable—volatile, as we might say in the investing industry. At this time of year, winter and spring contend with one another like bears and bulls in financial markets. When it comes to the seasons, however, we may suffer the odd gale, but we know the days will lengthen, the air will warm. The markets are not so easy to forecast.

Tomorrow is “Super Tuesday” here in the U.S. Last week, all the talk in Europe was about “Brexit.” These newspaper buzzwords rarely figure in investors’ strategy meetings. But a new specter is haunting markets: the specter of political risk.

We believe U.S. banks are well-capitalized, well-managed and good value.

At our most recent (fourth-quarter) Asset Allocation Committee meeting, perhaps the single most important issue we considered was whether the then-fresh decline of risk assets indicated a needed bull market correction, or something far more serious. Our analysis suggested short-term weakness, but for a while, the noise around China’s devaluation, Federal Reserve policy and concern about emerging markets and commodity prices had many investors very worried.

The brutal selloff in the energy sector has produced a good deal of collateral damage, even among businesses that seemingly have little to do with the price of crude oil.

When we work with clients to design a customized portfolio, we need to understand their most fundamental goals.

Today’s financial world disputes many of the most basic assumptions of yesteryear’s investing “truths.” Globalization, the rise of a “winner take all” digital economy and markets led by policymakers have redrawn the investing map in profound ways.

Approaches that are commonly employed in shorting a single corporate bond

The Committee upgraded our view on U.S. large cap equities following the recent correction, and maintained a slightly overweight view on European equities. Our view on MLPs has also improved following a challenging year.

Master Limited Partnerships (MLPs) have seen sharp declines this year, underperforming not only broad equity markets but also other income-producing assets such as utility stocks and real estate investment trusts.

A quiet revolution is happening in hedge funds. Investors continue to allocate to the asset class, but the way they are allocating is changing, while its investor base is growing broader and becoming more inclusive.

When it comes to the duration of the business cycle, 50 is the new 40. Much the way that better diet, health care and exercise have helped double life expectancy over the past century, central banks have prolonged the current expansion using new elixirs such as zero interest rates and quantitative easing. At 72 months, the business cycle has well surpassed the 58.4-month average of the modern era and is now more than twice the length of the pre-WWII average.

After months of eerie quiet in Washington, DC, fiscal conflicts have taken center stage, most prominently with the October 1 "shutdown" of U.S. government services. Markets are nervously watching if Congress can move past current wrangling to create a workable budget while navigating both the debt ceiling and shutdown-related fallout. In this issue of Strategic Spotlight, we consider how the budget debates could play out and the implications for investors.

A striking feature of this years global stock market rally is that international markets have significantly trailed U.S. stocks. Nevertheless, Neuberger Bermans Asset Allocation Committee (AAC) recently made the contrarian call of upgrading its view for international developed markets, particularly Europe. In this Strategic Spotlight, we provide an update on the European economy and lay out some reasons for optimism despite the dour growth outlook.

The mantra "sell in May and go away" has taken on a new twist this year. Equity markets saw mixed returns last month but bonds took a beating, with losses materializing in nearly every fixed income segment. The reason? Interest rates rose significantlyand rather unexpectedlyover the course of the month. What implications would rising rates have for the market? We consider whats ahead.

Earlier this year Andrew A. Johnson, Neuberger Berman?s Chief Investment Officer for Investment Grade Fixed Income, led a series of discussions with institutional clients about the state of the fixed income market and key ideas in approaching opportunistic fixed income investing in the current environment. Here, Mr. Johnson has adapted, and elaborated on, the concepts described at those meetings.

Bank of England leaves monetary policy unchanged. S&P 500 and DJIA post gains of 1.3% and 1.1%, respectively. U.S. inflation and housing data and euro area GDP headline this weeks economic releases.

Understanding where we are in the an important aspect of investing, as the behavior of asset classes may vary throughout that cycle. Recent data indicate that the U.S. remains in its fourth year of expansion, but payroll and retail numbers have disappointed. Outside the U.S., Europe continues to be mired in recession while Chinas growth rebound recently has appeared to sputter. In this edition of Strategic Spotlight, we review what these developments mean for the global business cycle and how to position portfolios accordingly.

Last year, despite the noise surrounding the U.S. elections and the ongoing European debt crisis, the main drivers of asset prices arguably were the large-scale bond-buying programs put in place by global central banks to alleviate systemic pressures. In 2013, we anticipate fewer aggressive central bank actions as the pace of global growth gradually picks up. We believe the largest influential factors to our outlook are premature fiscal tightening in the U.S. and a potential resurgence of eurozone problems.

The fiscal cliff bill, formally titled "American Taxpayer Relief Act of 2012" ("Act"), was signed into law by the President on January 3. The Act extends certain tax relief provisions enacted in 2001 and 2003, and contains numerous other tax provisions.

Earlier this year, we offered a forward-looking view of 10 macro themes that we anticipated for 2012. These ideas were meant not to be "surprises" but rather guideposts within the context of a longer-term strategic allocation. At year-end, we are pleased to note that seven of our 10 themes fully materialized. We provide a brief look below.

As we approach the New Year and contemplate the opportunities the investment landscape may offer in 2013, it helps to look back at the performance trends of 2012. Overall, the year-to-date period has seen impressive results from various risk assets, which is in line with the projections of our Asset Allocation Committee. However, ongoing concerns about volatility and Europe hampered the markets at times. Here, we provide a performance scorecard and consider potential developments in the year ahead.

As we approach the New Year and contemplate the opportunities the investment landscape may offer in 2013, it helps to look back at the performance trends of 2012. Overall, the year-to-date period has seen impressive results from various risk assets, which is in line with the projections of our Asset Allocation Committee. However, ongoing concerns about volatility and Europe hampered the markets at times. Here, we provide a performance scorecard and consider potential developments in the year ahead.

As in the case of Treasury bonds, yields for U.S. corporate credits have fallen to historic lows as prices have risen. The yield on the Barclays Aggregate U.S. Investment Grade Bond Index was recently at 2.8%far below levels achieved during the heady days of 2007. Obviously, this reflects overall interest rates, but is it also a sign that corporate issues may be overvalued? We explore the issues and consider how investors should position their portfolios for the current environment.

As year-end approaches, the U.S. is inching closer to a potentially defining moment in its post-debt crisis economic recovery. A series of expiring tax cuts, spending reductions and new taxes equating to over $600 billion (or 4% of GDP), popularly known as the "fiscal cliff," are slated to take effect in early 2013.

Congress remains split following Tuesday's vote (Democrat Senate, Republican House. DJIA and S&P 500 decline 2.0% and 2.3%, respectively, last week. European Central Bank and Bank of England maintain current monetary policy stances.

As the eastern seaboard continues to recover from the aftermath of Hurricane Sandy, estimates for the economic cost of the storm continue to climb and currently stand in the range of $30 to $50 billion. In the near-term, economic activity in the region is likely to be negatively impacted by the storm; however, the rebuilding of infrastructure, housing and businesses should boost growth in areas most impacted by Hurricane Sandy over the longer term.

On September 13, the Federal Reserve announced a third round of quantitative easing, dubbed QE3, in the hope of providing an additional boost to the slow U.S. economic recovery. Although this latest policy action reinforces the notion that the U.S. is prepared to support its economy for as long as needed, some economists question whether the stimulus can really make a difference. In this issue of Strategic Spotlight, we consider the recent effects of loose monetary policy and whether the Fed has "reached its limit."

Through the first two weeks of earnings season, corporate results have largely mirrored the releases we witnessed a quarter agoof the 118 S&P 500 companies that have reported to date, only 60% have exceeded their earnings estimates while 29% have surpassed their revenue expectations. This week, we will see financial results from 169 S&P 500 companies, representing 32% of the index market capitalization, which will be well dispersed across all 10 S&P 500 sectors.

Heart of earnings season begins this week. Given potential dividend tax increase at yearend, many are watching for one-time dividend payouts. Second U.S. presidential debate scheduled for Tuesday.

We've heard increased dialogue recently about the future of the tax exemption for municipal bond income. While it has long been commonly thought that taxing municipal bond income would result in higher borrowing costs to governments potentially impairing their ability to operate the current political landscape, upcoming election and looming "fiscal cliff" have opened for debate the prospect of changes to longstanding provisions of the U.S. tax code.

ISM Manufacturing Index expands for first time in 4 months. U.S. payrolls add 114,000; unemployment rate declines to 7.8%. Alcoa kicks off 3Q earnings season on Tuesday.

Our Investment Strategy Group sizes up the approaching U.S. election and its potential impact on the "fiscal cliff."

The "BRIC" countries have been a focal point of investor interest since the early 2000s. Brazil, Russia, India and China account for about half of the world's population, boast vast natural resources and are among the fastest-growing economies in the world. That said, progress at times has been uneven. Since 2010, the MSCI BRIC Index has largely underperformed the S&P 500 as economic growth flagged. In this edition of Strategic Spotlight, we discuss current conditions and the outlook for these markets.

Headwinds in the housing market appear to be abating as the U.S. economy gradually heals.

The corporate earnings season for the second quarter of 2012 has just about ended. Investors entered this period with much apprehension as the global economic slowdown set expectations for disappointing earnings. However, U.S. numbers surprised on the upside, contributing to a rally in equity markets worldwide. Given the importance of the corporate sector to the current economic recovery, we take a deeper look at recent earnings data to highlight important trends.

With bond yields declining globally, stocks with high dividends have become increasingly popular as income seekers face a narrowing set of investment choices. The increased demand has caused dividend-paying stocks to outperform broader markets over the past few years, but as the expiration of the Bush tax cuts looms ever larger heading into year-end, investors are concerned that these stocks might grow less attractive. We explore the potential impact of higher taxes on dividend-paying stocks and how investors should be positioned in the months ahead.

Although Treasury bonds have performed well in recent years, investors should be aware of increasing risks as yields decline. Yields for 10-year Treasury Inflation-Protected Securities have been persistently negative since the fourth quarter of 2011 and continue to trend lower, implying that investors are paying increasingly higher prices for the relative safety these investments are supposed to provide.

The European Union (EU) summit last week in Brussels surprisingly yielded some promising outcomes. EU leaders agreed to important short-term measures that can ease the recapitalization of banks but structural issues, such as increasing banking and fiscal integration in the euro area, remain unresolved. Without longer-term measures, the volatile nature of the debt crisis, as evidenced by the Greek elections on June 17, will continue to impact confidence.

The second quarter experienced a return to volatility as heightened concerns over the European sovereign debt crisis and an aura of pessimism around the pace of global economic growth have reverberated through financial markets. The year began on a positive note, with all major equity indices posting strong double-digit gains.

The Chinese growth story is especially impressive. At a time when many economies have struggled, China has continued to expand rapidly, helped by its dominant position in manufacturing, growing middle class and, after the 2008 credit crisis, its successful injections of capital and stimulus to ward off recession. Nevertheless, recent data have suggested that the Chinese expansion is now slowing more quickly than most investors expected.

Absent congressional intervention prior to year-end, over $600 billion (about 4% of U.S. GDP) of fiscal tightening is scheduled to take effect in the United States in early 2013. Dubbed the fiscal cliff by those in the financial community, the negative impact on growth caused by expiring spending and tax provisions has the potential to derail the ongoing recovery and, according to some observers, even tip the U.S. economy back into recession.

In the two years since the onset of the European sovereign debt crisis, policymakers have struggled with the issue of fiscal integration and the tradeoff between growth and austerity. Although many observers hoped that some clarity would emerge from the recent elections in Greece, France and Germany, political paralysis continues throughout Europe. In this edition of Strategic Spotlight, we discuss the fiscal and growth outlooks for key eurozone countries and the region overall.

NYSE Euronext recently reported a 44% decline in quarterly earnings, due largely to a 23% drop in the exchange operators trading volumes from a year earlier. The development confirmed something already known to many in the investment communitythat equity trading volumes have been depressed, which is traditionally a technical indicator of bearish sentiment. Curiously, this light volume has come in the midst of a 29% advance by S&P 500 since its October 4, 2011 market low. In this edition of Strategic Spotlight, we discuss the reasons for the meager volume and what it could mean for investors.

Although growth could slow from here, we do not believe economic conditions will deteriorate enough to provoke further accommodative measures from the Fed. The Fed may be on hold for the time being, but we also believe that Bernanke is acutely aware of the potential consequences of reversing monetary policy too quickly. As a result, interest rates may stay lower for longer. In this type of yield-constrained environment, we continue to favor segments like high yield fixed income and emerging market debt, which both offer attractive sources of income and upside potential.

On April 2, the Institute for Supply Management reported that the ISM Manufacturing Index had increased to 53.4 in March from 52.4 in February, slightly ahead of consensus forecasts. Although this often-watched indicator has flirted with contraction territory (below 50) at different points throughout the economic recovery, it has now expanded for 32 consecutive months since August 2009 and continues to point to strengthening economic growth. Here, we discuss our expectations for the manufacturing sector and its potential impact on financial markets.

The resurgence of risk appetite witnessed in late 2011 has continued, with most major equity indices up in double digits for the year-to-date. In contrast, fixed income indices have posted very modest and, in some cases, negative returns in the first quarter. Much has been accomplished in the U.S. and globally that has contributed to the now six-month-old equity rally. However, concerns remain. Given this picture, the Asset Allocation Committee's core view remains steadyunderweight bonds, overweight equities.

In 2011, the S&P 500 finished essentially flat on a price-return basis. That return, however, would not have been achieved without a 15% gain over the last three months of the year. Equities have since picked up where they left off and, year-to-date, most major indices are up by double digits. Front-of-mind for investors is whether this momentum can be maintained. We offer the bear and bull cases as well as our thoughts on what may lie ahead.

The post-global financial crisis environment has resulted in rock-bottom yields for U.S. Treasuries and other sovereign debt deemed to be either liquid or low risk. This situation leaves income seekers in some markets with a negative real yield (inflation adjusted), which could become more manifest during periods of rising interest rates in eventually recovering global economies. Alternatively, these investors may want to consider migrating a portion of their asset allocation to less senior income-producing securities.

In 2011, many investors appeared concerned about the potential for widespread defaults in the U.S. municipal bond marketsomething that failed to materialize. Now, we check in with the municipal markets and find that the outlook is greatly improved; however, in the wake of recent robust performance, it may also be a good time to exert some caution.

Over the last year, we have become more guarded on GARVEE bonds based on changing dynamics in the municipal market that have been driven largely by fiscal pressure and dysfunctional Washington politics. In this piece, we discuss why our views have changed and the assumptions we use in our proprietary stress test model that help the Neuberger Berman Municipal Research Team avoid potentially problematic bonds.

After an extended period of high correlations, U.S. and European stock markets have taken distinctive paths in recent months. In this report, we take a look at the link between underlying economic fundamentals and market results to consider whether these markets have truly decoupled or are simply going through a temporary separation.

As the November election inches closer, taxes are as always a key element of the political debate. This time out, however, the issue of income inequality has become more prominent, altering the typically partisan argument over tax rates. Below, we take a closer look at the dynamics of income inequality, how it could affect the long-term outlook for U.S. economic growth and what that implies for tax policy.

U.S. showing continued improvement in economic indicators, while IMF predicts Europe contraction. Improvement in economy and favorable fourth quarter earnings helped S&P 500 to its best January since 1997. Given situation in Washington and Europe, investors unlikely to experience a smooth ride.

The housing crisis has left a lasting mark on the U.S. economy. Six years after the market peak in 2005, home prices continue to falter in some areas of the country, volumes remain low, and many investors and potential homebuyers remain wary of the residential marketplace. In this edition of Strategic Spotlight, we examine recent data from the U.S. housing market to consider how they may figure into overall growth expectations going forward.

The sovereign debt crisis in Europe has placed persistent pressure on global equity markets since first emerging as a problem in Greece in the first half of 2010 and quickly spreading to Ireland, Portugal, Spain and Italy. In a recent panel discussion, moderated by Investment Strategist Leah Modigliani, Benjamin Segal, portfolio manager and head of the Global Equity team, and Tony Gleason, portfolio manager for the MLG Group, discussed the turmoil in Europe, prospects for global growth, and some potential areas of opportunity. We share their thoughts below.

It is one thing to theorize about markets. It is quite another to invest. With that sentiment in mind, we offer a sampling of views from some of our portfolio managers across our firm who each independently form their own conclusions as to what to make of the market and how to position portfolios according to their respective investment disciplines.

Thematic investing is all about anticipating and capitalizing on secular change. Major demographic, societal, technological and political developments around the world create abundant investment opportunities. The key is to position your portfolio to take advantage of the changing landscape before many of the changes actually happen. This requires substantial research and preparation to separate shorter-term fads from true paradigmatic shifts that have visibility of at least five to seven years. During tough periods, our themes guide our investments by providing a focus for our decisions.

After a decades-long hiatus, inflation appears to be making a comeback. Clearly few anticipate a return to the days of the late 1970s and early 1980s when double-digit annual inflation gains were the norm. Still, the cumulative impact of inflation can be costly even during periods of modest price increases. According to Bloomberg $100 saved by the end of 1988 was ?worth? only $56 by the end of 2009. Investors may wish to take into account such changes as they estimate the potential returns of their portfolios, and consider incorporating inflation hedges into their investment strategy.

As the U.S. economy continues to strengthen and the prospect of inflation rises, investors are concerned the U.S. may potentially face a sustained period of rising interest rates. This matters to bond owners because changes in interest rates directly impact the market value of bonds and bond portfolios. With today?s fixed income markets now implying an increase in interest rates and higher volatility in credit spreads, a traditional buy-and-hold bond portfolio or a more traditional fixed income mutual fund strategy may not be as attractive to investors.

As a result of the financial crisis, for the latter part of 2008 and all of 2009, very few new private equity transactions were completed and portfolio company monetization was minimal. However, the operating performance of existing private-equity portfolio companies was better than generally expected and investment returns were superior to public equity benchmarks. Although some of this outperformance can be attributed to the resistance of some private equity firms, we believe the majority of the outperformance was the result of effective cost cutting, cash conservation and debt reduction.

During 2010, macroeconomic factors largely dominated the financial markets, creating a volatile, emotional environment as investors appeared at times to be thinking less about what stocks to own than whether they should own stocks at all. As a result, many equities with very different fundamental characteristics often showed very high correlations to one another, while valuations converged. Over time, we believe that the market will differentiate these stocks based on their individual fundamentals. A similar statement can be made about other assets as well.

We anticipate modest but positive global economic growth in 2011. Economic growth in emerging markets should benefit developed-market firms with global reach as well as emerging-market companies. Issues we are closely watching: the potential for currency/trade wars, asset bubbles and inflation in the emerging markets, increasing regulation and possible negative impacts of monetary tightening. Many overseas corporations are profitable and healthy, with cash available for M&A, higher dividends and other corporate activities.

Entering 2011, there is no shortage of potential issues that could ignite periods of extreme market volatility. While short-term market gyrations are unsettling for both novice and experienced investors alike, for the year as a whole, we believe the outlook for the economy and the fixed income market is generally positive. In particular, certain non-Treasury sectors have compelling fundamentals going into the New Year. In our opinion, these areas could benefit generally from an increased risk appetite, should investors seek incremental yields given a continued low interest rate environment.

Is continued discomfort in the stock market justified? It can be argued that the economy is relatively weak, and with high unemployment, the weak housing market and a new focus on fiscal restraint, few expect rapid expansion anytime soon ? not exactly a bullish sign for an asset class that is supposed to benefit from expansion. However, from a number of vantage points, stocks are displaying what we consider attractive characteristics that suggest the benefits of maintaining substantial exposure to equities in the current environment.

We believe the dollar is likely to move higher on an intermediate-term basis. QE2, in our opinion, could lead to stronger economic growth in the U.S. and eventually drivehigher yields, making the dollar more attractive to investors. In our view, the impact of QE2 was already in the price of the U.S. dollar at the time of the announcement. And the market is generally still shorting dollars.

With emerging market economies posting substantially higher growth rates, many investors are increasingly attracted to emerging equity markets. Equity returns, however, tend to be driven more by earnings growth than by GDP growth. Returns are also influenced by other factors such as a country's financial market structure, fiscal and monetary policies, and legal standards. Furthermore, index or ETF investing may not capitalize on stock-specific factors that contribute to the underlying economy's performance.