Momentum, trend-following, managed futures - are terms that can seem intimidating and opaque for many investors. But, while these types of investment strategies may be less familiar than traditional strategies, they can be quite intuitive and offer attractive diversification and return potential that is worth getting to know.
Our approach to investing in long duration and long credit portfolios has delivered meaningful alpha over most market cycles.
After an uncharacteristically eventful August in Washington, Congress returns to D.C. for an even busier fall: In September, it has a mere 12 legislative days to fund the government for fiscal 2018 (and thus avoid a shutdown), raise the debt ceiling and address a smattering of other must-pass bills...
Although inflation may seem a distant threat, even modest inflation can prove devastating to retirees who depend on income that does not adjust with inflation.
Who will be the next governor of the Bank of Japan (BOJ)? This is an important question to be answered in the next several months, as Governor Haruhiko Kuroda’s current term will expire in April of next year.
Federal Reserve Chair Janet Yellen’s remarks at the annual Jackson Hole Economic Policy Symposium delved into history but offered few clues about the future course of Fed policy.
With critical policy pivots on the horizon, investors should approach asset allocation with full appreciation for downside risk and stay focused on relative value and security selection.
U.S. exploration and production (E&P) companies delivered mixed second-quarter earnings results and guidance, with evidence of operational missteps by certain Permian Basin producers. One particular large producer’s report of drilling delays, higher planned well costs and higher gas-to-oil ratios sparked broader concerns about whether Permian producers can maintain efficiencies and execute on plans to drill larger wells.
The use of credit to fuel growth in China is weakening, a trend that has begun to depress demand for imports. Given China’s seminal role as an engine of global growth, the ripple effects will weigh on growth prospects for the countries most exposed to Chinese demand, including those in Asia and Latin America.
The news coming out of the July Federal Open Market Committee (FOMC) meeting was a reference in the statement that the Federal Reserve expected to begin to implement its balance sheet normalization program “relatively soon,” which we (along with many market participants) took to mean at the upcoming September meeting.
A review of last month’s market-moving events across countries and asset classes
Following another underwhelming U.S. CPI report, it’s now entirely possible that core personal consumption expenditures (PCE) inflation – the Federal Reserve’s preferred measure, currently at 1.5% – will end the year at 1.3%, a far cry from the central bank’s 2% target.
Another underwhelming rise in the U.S. core Consumer Price Index (CPI) reported on Friday increases the chances that Federal Reserve policymakers use the September meeting to signal they plan to abstain from additional interest rate hikes until next year.
Over the next 12 to 24 months, we expect that Asia, led by China, will become a far more significant part of the global capital markets – and global investment portfolios.
Outcomes from the most recent state budget season, which concluded for most U.S. states on 30 June, underscore the need for caution among municipal bond investors.
Earlier this year, Argentina, the Czech Republic and Uruguay joined the bellwether benchmark for the asset class, JPMorgan GBI-EM Global Diversified, taking the total to 18 countries. China, Egypt and another three countries may enter the index next year. The inclusions will make the EM local debt asset class much larger, deeper and more liquid.
Over the past quarter century, large and ever-larger companies have significantly increased their share of total intra-industry sales across a majority of industries. These superstar firms – including Facebook, Amazon, Apple, Netflix and Alphabet’s Google (known collectively as FAANG) – increasingly dominate their respective industries in terms of revenues, profits and stock market capitalization. The winner these days may not take all, but most.
After Japan’s Prime Minister Shinzo Abe reshuffled his Cabinet on 3 August, the big question is whether his administration can regain public support. In just the last two months, Abe's public approval ratings have plunged to around 30% – low enough to raise red flags.
The muni backdrop looks benign, but be mindful of potential credit risks.
Bond investors are from Mars, and central bankers are from Venus – or so suggests the bond market’s negative reaction to signals that the exceptional monetary policy accommodation of the last decade is winding down. Risk-asset markets, however, are ignoring the red flags that the bond markets are waving. Are they right?
The UK Financial Conduct Authority (FCA) announced on 27 July that it would not sustain the London Interbank Offered Rate (Libor) – the key (and controversial) benchmark for hundreds of trillions of derivatives contracts – after 2021.
Five years ago this week, Mario Draghi’s landmark “whatever it takes” speech turned the tide of the euro crisis, the president effectively clarifying the European Central Bank’s role as a conditional lender of last resort to eurozone sovereign borrowers.
Much of the world has been waging a cold currency war since the autumn of 2016, and so far the winner is Donald Trump. The dollar rally that followed the U.S. election is over, and this past week the U.S. Dollar Index (DXY, which tracks the dollar’s value versus a weighted basket of major currencies) sank to its lowest level in more than a year.
Asia’s integration into world financial markets may be accelerating.
When PIMCO professionals gather for our annual Secular Forum to discuss the long-term global economic outlook, views on Europe invariably gravitate on two themes: anemic GDP growth and political risk.
Why is the U.S. housing sector diminishing when demand for housing remains robust?
The Federal Reserve is likely to begin normalizing its balance sheet in 2017. Why hasn’t this news rattled the bond market?
A growing number of Federal Open Market Committee officials have voiced concerns over decelerating inflation since the June FOMC meeting, and the latest inflation print likely did little to alleviate them.
A review of last month’s market-moving events across countries and asset classes.
Since the global financial crisis, the notion of what constitutes an appropriate liquidity management and capital preservation strategy has become a source of heated debate among professional institutional investors and retail-oriented allocators alike, with varying opinions on how to balance a preference for returns against the need for immediate liquidity and capital preservation.
After 25 years of steady economic growth, Australia is on the verge of wresting bragging rights from the Netherlands for the longest period on record without a recession. While this historic event should be celebrated, the future may not be as rosy.
An active approach to the complex, fragmented municipal bond market may help investors avoid several common drawbacks of passive strategies.
Equity market peaks (and troughs) are impossible to identify in advance. But this doesn’t mean that equity investments should simply be “set it and forget it.”
The Federal Reserve hiked rates as expected at its meeting on 13–14 June 2017, and it made news by providing important details about its plans to normalize its balance sheet. However, one crucial detail the Fed did not provide: when it will commence that process of balance sheet normalization.
Normalization of the European Central Bank’s (ECB) monetary policy never was a question of “if” but one of sequencing, timing and calibration. Financial markets reacted to ECB President Mario Draghi’s speech in Sintra this past week in a way suggesting the ECB might change all three of those policy normalization parameters.
There has been a lot of discussion about a recent academic paper, "Why Indexing Works," which makes a statistical case for passive investing in equities. The same logic applied to bonds, though, may make the opposite case: Passive fixed income management doesn't work, but active bond management does.
Just as the global economy faces a number of important pivot points that investors should look for over the next several years, so some domestically generated pivot points will shape the UK economy in the coming years – largely stemming from UK politics.
The effort to repeal and replace “Obamacare” hit yet another stumbling block this week when U.S. Senate Majority Leader Mitch McConnell decided to pull the bill from consideration after realizing he did not have sufficient votes for it to pass.
The global economy faces several potential pivots in the direction and scale of monetary, fiscal, trade, geopolitical and exchange rate policies. One in particular will help determine the long-term outlook for China and emerging Asia.
According to the Global Sustainable Investment Alliance, over $22 trillion of assets were managed under responsible investment strategies globally in 2016, up 25% from two years before. This is one of many statistics showing Environmental, Social and Governance (ESG) investing moving into the mainstream. We see 10 major trends contributing to the rise.
This is an exciting time to be an investor, but it’s also a very uncertain one. Risks to both the upside and downside are much higher than they were even a year ago.
The U.S. bond market’s post-election optimism has now evaporated: The 10-year nominal U.S. Treasury yield has dropped by almost half a percentage point from its mid-March 2.62% post-election high, with lower implied inflation rather than lower real yields accounting for most of the decline.
Why falling commodity prices may not upend the EM rally.
Another soft U.S. core Consumer Price Index (CPI) inflation report – the third in a row that has lagged expectations – could complicate the Fed’s intentions to raise rates one more time this year, as the central bank’s Summary of Economic Projections currently forecasts.
Market participants increasingly expect the Federal Reserve to begin unwinding its balance sheet during the second half of 2017, and many have speculated that the agency mortgage-backed securities (MBS) market – and the U.S. housing market more broadly – could suffer as a result.
Political risk, reform efforts and potential monetary policy shifts cloud the outlook for China, Europe and the U.S.
New equity offerings can garner media buzz. Think of recent initial public offerings (IPOs) by Snapchat, Alibaba and Visa. Business media enthuse, investors clamor, and share prices often rise, at least initially.
With the probability of recession sometime in the next five years around 70% in our view, now may be a critical time to prepare for when the cyclical tailwind that began last year begins to fade. Over the next five years, the global economy may undergo five significant pivots in the direction and scope of monetary, fiscal, trade, geopolitical and exchange rate policies. Are investors too optimistic about the future economy? We address this and other crucial questions in PIMCO’s 2017 Secular Outlook – our long-term view for the global economy and markets.
