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Trump Wins: A First Take On The Economic And Market Outlook
by Ken Taubes of Pioneer Investments,
Trump’s victory may be a positive for the US economy, but the wild car is Trump’s stance on free trade. Trump’s policy proposals for lower regulation and lower taxes could be highly stimulative to the US economy. The biggest uncertainty for future economic growth relate to his trade policy and whether Congress will be able to temper the more extreme aspects of his proposals.
Fed?s Inflation Target Misguided? Good vs. Bad Disinflation
by Ken Taubes of Pioneer Investments,
For more than a year the Federal Reserve Board has cited inflation below its targeted 2% level as one justification for maintaining its extraordinarily accommodative monetary stance. As of February, the core inflation rate was 1.1%, based on the Personal Consumption Expenditure (PCE) inflation series, the Fed?s preferred measure of inflation. But there is good reason to question whether the 2% target justifies current policy.
The U.S. Begins an (Un)employment Experiment
by Sam Wardwell of Pioneer Investments,
Extended unemployment benefits stopped for 1.3 million people at year-end. This doesnt change their employment status...they just stop getting unemployment compensation. Extended benefits (of up to 99 weeks) was part of the recession-fighting fiscal stimulus package. A question was: did this create a dis-incentive to find a job (aka "funemployment").
2013 A Pretty Good Year
by Mike Temple of Pioneer Investments,
This time last year we were bullish about equities and positive on the slow but steady strengthening of the economy. The market did not disappoint. The economy was almost heroic, you might say, with its performance enduring government sequestrations and higher taxes almost a 2% drag on GDP but comporting with our expectations of 2 - 2.5% growth. 2013 is ending with GDP and the markets coming fairly close to what we thought theyd achieve. Now the year is almost out, so lets take stock of 2013 but look ahead to 2014.
Where Have All the Savings Gone?
The last six years have witnessed the most severe financial crisis since the end of World War II, with household earning capacity and saving ability experiencing significant changes due to the downturn in the real economies. This challenging economic situation definitely affected household saving behavior, although the impact has been different in various countries - for some, the impact on household earning capacity was more intense than others.
What Will 2014 Bring for The Equity Markets?
As the year draws to a close, investors are searching for clues as to what may be in store for the economy and markets in 2014. What have we learned from the markets in the month of November? Honestly, not very much. The scenario has not changed much in the last 30 days.
The Fed is Playing Hamlet to the Markets
by Sam Wardwell of Pioneer Investments,
To taper or not to taper-that is the question the Fed is asking itself. Whats moving the market is (it appears) the odds of Fed action. For the first half of last week, "good news was bad news" as stock and bond markets apparently interpreted better economic data as suggesting an earlier QE (Quantitative Easing) Taper. On Friday, the market apparently decided the jobs report was good enough to further reduce downside risks to the economy but not strong enough to spur the Fed to action.
U.S. Economy Slowly Gaining Traction - What's Ahead for Year-End?
by Sam Wardwell of Pioneer Investments,
As we enter the final month of 2013, my themes of the last several weeks continue - the capital markets, in general, remain quiet and U.S. economic data, while mixed, shows signs of steady improvement. This week, Ill start by looking forward to some news well be watching as the year closes out...
What is the Current Market Reality?
At this years Global Investment Forum, the discussion among Pioneer investment professionals was generally positive. Of course, everyone was conscious of the current market reality: that the major force behind recent positive, though benign, market trends is the unprecedented creation of liquidity and extremely loose stance of monetary policies around the world. Monetary policy alone cannot be the only conduit to a new economic model of income growth and job creation.
Yellen's Testimony Not Surprising: Fed Has More Work to Do
by Sam Wardwell of Pioneer Investments,
Janet Yellens Senate testimony in last weeks confirmation hearings was very dovish and offered no real surprises. She did not signal or hint at any change in Fed policy (it was a confirmation hearing), but suggested that the best way to achieve an exit from unconventional policy is to deliver a stronger recovery . . . and the Fed has "more work to do" to support that recovery. The risk that she will not be confirmed is considered negligible.
New Fed Papers Foreshadow a Dovish Fed Policy Under Yellen
by Sam Wardwell of Pioneer Investments,
New Fed Papers Foreshadow a Dovish Fed Policy Under Yellen
Two new Fed papers presented at the International Monetary Fund (IMF) argue for prompt lobbying for continued aggressive monetary policy, but suggest prompt tapering of quantitative easing (QE) and more emphasis on forward guidance. The assumption is that these papers would not have been released if Janet Yellen intended to push policy in a different direction . . . and they reinforce the message of papers released at Jackson Hole this summer, suggesting that QE wasnt acting as effective economic stimulus.
Is This the New Normal'?
by Sam Wardwell of Pioneer Investments,
Markets Settle into a New Normal
All sorts of economic data were released last week, but volatility has dropped: rightly or wrongly, market forecasts about the pace of quantitative easing (QE) and earnings growth in the U.S. appear to have coalesced around an outlook for slow growth with ongoing QE.
Washington Strikes a No-Surprise Deal - Now What?
by Sam Wardwell of Pioneer Investments,
Congress called a time-out in the budget/debt fight last week, striking a deal to avoid default and fund the U.S. government through January 15, 2014 and raise the debt limit through February 7, 2014. While the parties agreed to budget talks, they did not commit to reaching an agreement (technically, Paul Ryan and Patty Murray, the House and Senate budget committee chairs will begin a process of fiscal negotiations, due to wrap up by mid-December).
Debt Limit Extended, Fed Policy in the Wings - What to Expect from the Markets
Last night Congress reached an agreement to raise the debt limit and end the 16-day shutdown. After all the acrimony and tense negotiations, the deal passed by a comfortable margin with 81-18 vote in the Senate and 285-144 in the House.
Equity Markets to Congress: What, me worry?
by Sam Wardwell of Pioneer Investments,
President Obama said he was willing to have discussions, though he said he wouldnt engage in negotiations. (Comment: I guess it depends of what the meaning of "is" is.) So far, those discussions havent produced a deal, but at least theyve started talking.
Little Visible Progress on the Budget Shutdown, but Some Inside Baseball In Play
by Sam Wardwell of Pioneer Investments,
President Obama canceled his planned visit to Asia and participation in the Asia-Pacific Economic Cooperation summitciting the inconvenience caused by the government shutdown (the difficulty in moving forward with foreign travel in the face of a shutdown), sending John Kerry in his place, and reiterating his unwillingness to negotiate with Republicans.
What Happens if the Government Shuts Down and Nobody Notices?
Yes, this is a facetiously philosophical title (what is the sound of one hand clapping?) that pokes fun at the current situation in Washington. And were well aware that if Republicans and Democrats cant reach a compromise in a couple of weeks to deal with the debt ceiling time-bomb, none of us will be joking around.
The Death of Fixed Income? Not so Fast . . .
Recent market movements have reminded investors that the fixed income market is facing a secular change, after a 30-year-long bull market driven by a continuous decline in interest rates. I believe the announcements of the death of fixed income as an asset class are greatly exaggerated, and in order to face the new reality, fixed income investors and asset allocators need to adopt a significant change of approach.
What Should Investors Know about the U.S. Government Shutdown?
by Ken Taubes of Pioneer Investments,
Yesterday was the start of a new fiscal year for the U.S. federal government, but failure to agree on a spending plan in time for that deadline left federal coffers short. As a result, a partial government shutdown took effect. Its important to emphasize that this was a partial government shutdown. Many services remain operational, such as our active military, Medicare/Medicaid, Social Security and airline travel.
Surprise! No Tapering and More Budget Progress than Meets the Eye
by Sam Wardwell of Pioneer Investments,
On Monday, Larry Summers exited the pool of candidates for the next Federal Reserve (Fed) chairman. (Only the timing was really a surprise.) On Wednesday, the Fed didnt taper and de-emphasized several of the targets theyd set earlier. (Big surprise versus consensus - not central bank best practices). Municipal bond offerings by Puerto Rico, California, and Illinois were met with strong investor demand.
How Did The Fed Catch Markets Off Guard? What Does it Mean for Investors?
by Ken Taubes of Pioneer Investments,
We think this decision prolongs the positive market environment we have seen in both equities and fixed income. With the Fed seemingly a distance away from tapering and raising rates, this could bode well for the risk sectors, where we could see further tightening in credit spreads on both high yield and investment-grade corporate bonds.
Will Europe's Improving Economy Push Interest Rates Higher
Gross Domestic Product (GDP) increased in the second quarter after six straight declines. Data expectations were on the optimistic side, but investors appeared to become more confident before the release, thanks to encouraging evidence from supposedly reliable forward-looking indicators.
Larry Summers Helps Clarify the Future Path of Fed Policy
by Sam Wardwell of Pioneer Investments,
Last Monday, at a London press conference, U.S. Secretary of State John Kerry responded to a reporters question about what might avoid a military move against Syria by ad-libbing that Assad could give up his chemical weapons. As you probably know, Russia promptly endorsed the idea and Assad promptly agreed. The long-term implications of this development are unknowable; what matters now is that the risk of a U.S strike declined sharply last Monday. Over the most recent weekend, the U.S. and Russia have apparently agreed on key details, further reducing the probability of an attack.
The Next Big Challenge to Investors: Rising Rates
by Mike Temple of Pioneer Investments,
Many investors were conditioned to accept that the economy would be in the rehabilitation ward for the foreseeable future, rates would remain low, and monetary stimulus would continue unabated. It was an increasingly dangerous mindset. Now thats changing with the slow but steady recovery of the economy and the Federal Reserves announcement in August that it may begin tapering its billions in monthly bond purchases designed to keep rates low and boost asset prices.
Municipal Bond Market: Tune out the Noise
Since Ben Bernankes misinterpreted comments on tapering, Detroits bankruptcy filing and the even more recent, well-publicized concerns regarding Puerto Rico, the municipal bond market has struggled mightily. Year-to-date as of September 5, the Barclays Municipal Investment-Grade Index is down 5.3%, and the Barclays Municipal High Yield Index is down 8.3%.
Four Interest Rate Scenarios We Could Face
by Mike Temple of Pioneer Investments,
Ive written a lot lately on the subject of duration and its potential impact on investor portfolios, now that the initial goals of the Federal Reserves Great Monetary Experiment appear largely accomplished and tapering of its monthly purchase of Treasuries to keep rates low is on the table. The era of lowering interest rates and rising bond prices looks finally at an end, with no place for rates to go but up. Its vital, then, that investors think about the impact that rising bond yields could have on their portfolios. Here are a few scenarios w
Emerging Markets Feel the Ripples of Fed Tapering
by Sam Wardwell of Pioneer Investments,
Many Emerging Market currencies (notably those of India, Brazil and Indonesia) have been weak since the beginning of May. The declines accelerated sharply in recent weeks, leading to something approaching panic in several markets last week.
Revisiting the USD Bull Market
The USD bull market has begun with signs that the USD is transitioning to a cyclical currency. Monetary policy divergences in G4, slowing in USD diversification and a dramatic turnaround in the twin deficits, provide a strong fundamental underpinning to a USD rally going forward.
The Next Big Challenge to Investors: Duration
by Mike Temple of Pioneer Investments,
Many investors have been conditioned to accept that the economy will be in the rehabilitation ward for the foreseeable future, rates will remain low, and monetary stimulus unending. We believe this is an increasingly dangerous mindset and the next great risk for bond investors is coming into view: the return of higher interest rates. We look at the refuge subsectors those areas of the fixed income market that investors may believe provide safe haven from the gathering storm.
A Lot Of Action In What Was Expected To Be A Quiet Week
by Sam Wardwell of Pioneer Investments,
Most of the U.S. economic data released last week was rather ho-hum, consistent with continuing slow growth, but markets werent boring. Maybe markets are thin because its August, but the U.S. Treasury market had one of its worst weeks in a long time, and the selling spilled over into the U.S. stock market.
Will Soft Q2 GDP and Jobs Data Influence Fed Tapering?
by Sam Wardwell of Pioneer Investments,
As I said mid week, the fiscal cliff tax increases were squeezing consumers disposable income and spending growth was coming at the cost of a lower savings rate. Suspending the social security tax was expected to stimulate the economy, so its only logical that it would work in reverse, too.
The Damage Potential of Rising Rates
The initial goals of the Federal Reserves Great Monetary Experiment to keep rates low, create negative real yields, spur consumption and cushion the budgetary consequences of fiscal stimulus have largely been accomplished. Investors could now face the threat of rising bond yields. Various bull and bear scenarios might ensue. What are they and what could trigger them? What are the risks to portfolios?
Stocks and Bonds Both Again Rally as Bernanke Soothes
by Sam Wardwell of Pioneer Investments,
Fed Chairman Ben Bernankes congressional testimony got more headlines, but Detroits long-anticipated formal filing for Chapter 9 bankruptcy was by far the more important development. Billions of dollars of losses will be imposed on general obligation bondholders and/or retired employees.
How to Catch an Investment Wave'? Get in the Water!
by Joe Kringdon of Pioneer Investments,
At the beginning of the summer, I always start singing (or humming) some Beach Boys song as my own personal soundtrack to this glorious and seemingly carefree season. The song “Catch a Wave” has particular significance not because I’m a surfer, but because one of my investing mentors once used surfing as analogy for me.
Did Bernanke's Dovish Comments Please the Markets?
by Sam Wardwell of Pioneer Investments,
The key phrase: About half of these participants indicated that it likely would be appropriate to end asset purchases late this year. Many other participants indicated that it likely would be appropriate to continue purchases into 2014. Bonds rallied, suggesting that the sell-off of the past few weeks had exhausted itself or overshot (at least for now).
China's Curbs on Bank Lending: Implications for the World Economy?
Banks are by far the top-weighted sector group in China, so theres little chance for the broad market to buck the trend. Indeed the problem is sector-specific at first glance. Policy makers want to curb excess bank lending in an effort to make the industry better managed and more selective.
The Germans Deserve Credit for Extending Credit
by Sam Wardwell of Pioneer Investments,
Germanys government agreed to (indirectly, via guarantees) provide Spains government-run ICO development banks with the funding to make up to 800 million of low-interest loans to small and medium-sized businesses.
The Fed's Prisoner Dilemma: Interest Rates Too Low for Too Long
by Mike Temple of Pioneer Investments,
The Prisoner Dilemma is based on the example of two prisoners who are told that if one testifies against the other, the one who testified will go free, but if both testify against the other, both will be jailed a conundrum about courses of action that dont result in the ideal outcome. We believe the Federal Reserve (Fed) will try to manage expectations so that the Treasury yield curve does not adjust too violently.
How Bonds Will Suffer Before the Fed Raises Rates
by Mike Temple of Pioneer Investments,
The Federal Reserves years-long zero-interest rate policy has flattened Treasury yields to where rising interest rates and inflation are almost assured manifestations. Investors may have to face the threat of rising bond yields. Damage to high quality, long-duration debt instruments would likely happen far in advance of a rise in interest rates with periods of significant volatility. What are the risks to portfolios? The first in a series of three papers that examines this questions is now available.
How Does the Fed's Recent Action Compare to EM Central Banks?
In an interview on Bloomberg Radio with Tom Keene and Ken Prewitt, I shared my thoughts on the Feds recent announcement that it would continue its QE efforts for the time being. If you missed the segment, Ive summarized that conversation here for you.
Is Volatility Dead? Hardly.
Certain pundits suggest we have entered a new volatility regime that volatility has been tamed by the massive amount of liquidity injected into worldwide capital markets by very accommodative central banks. We take a different view. While volatility has been declining across many asset classes, it is creeping into several that may have escaped some investors attention.
Are Recent Market Highs Merely Rhymes, or Something More?
by Joe Kringdon of Pioneer Investments,
As someone smarter than me once observed, history never repeats itself, but it does rhyme. Oftentimes those rhymes, like my familys dinner bills, are simply head fakes curious coincidences with no residual meaning. Other times, however, they do carry meaningful implications. Consider, for example, whats going on in the markets right now.
Results 1–50
of 78 found.