Portfolio Allocation Amid the Tidal Effects of Renewed Fed Easing
The Fed is poised to join the global easing bandwagon, fueling a surge in risk asset prices. As market distortions from easy money grow, so does the importance of security selection and portfolio allocation.
Muni Bond Sales Surge as Issuers Ride Demand Wave
Caveat emptor: current technical supply and demand flows favor issuers more than buyers. But diligent, disciplined investors can always find attractively priced, fundamentally sound bonds.
Suffering Liquidity Withdrawal Syndrome, Market Gets Its Fix
It appears the “Powell Put” has been exercised as the Fed chief declares no “pre-set” course on rates and no “hesitation” to change its balance sheet runoff. But does the economy still need Fed accommodation, or do markets just want it?
The Presidential Put, the Powell Put, and China’s New Playbook
The trade conflict and Fed rate policy are buffeting markets at a time China was already grappling with debt challenges at home. But the volatility may be masking good economic fundamentals globally, reform efforts in China, and attractive investment opportunities.
From China to Mexico to Brazil, Headline Noise Obscures Underlying Emerging Market Drivers
Positive catalysts are in place in all three countries, and across emerging markets valuations and earnings expectations make for a potential rebound in 2019.
Market Rout May Spur Rotation from Growth to Value
Even before the market selloff, downtrodden value stocks were perking up as pricey growth stocks stumbled. But durable index-level shifts are harder to call than individual stock price disconnects from business fundamentals.
The Efficiency Factor in Stock vs. Index Picking
If the efficient markets hypothesis is questionable at the stock level, it’s more so at the index level. As the number of indices skyrockets, the number of companies declines, and passive flows grow, active price discovery becomes more and more valuable.
A More Demanding Powell Put to Test EM’s Strengthened Mettle
The Fed chairman makes clear the bar for slowing monetary tightening is higher nowadays, and argues emerging markets are much better positioned to handle higher U.S. yields than they were before.
The Tech Wreck, Bank Breach, and Welcome Return of Market Volatility
Tech and financials led the recent selloff, as headline noise and regulatory risks spooked investors. But strong corporate fundamentals, including earnings growth, should ultimately drive stock returns.
Understanding the Confucian in Xi's Populism
China has dropped norms to allow President Xi Jinping to remain in power after his second term ends. While worrisome at first blush, the populist turn and consolidation of power likely has near-term economic and financial market benefits, and longer-term political risks. Thornburg's Lei Wang weighs in on the populist turn in China, which is among a growing contingent of populist nations.
Emerging Market ETFs Traded Reliably During Selloff. But What about their NAV Disconnects?
EM ETFs suffered deviations in their market prices relative to their net asset values, with their total returns materially underperforming the broad emerging market index.
U.S. Stocks Fall into Correction Territory, But Investors Should Keep Their Chins Up
Investors worried about wage and inflation data should appreciate the underlying strength of the economy, not to mention strong corporate earnings. The market volatility is creating better entry points for longer-term investors.
Net-Neutrality Noise: Competitive Broadband Market Driven by Technological Change, Not Politics
The FCC’s roll-back of net-neutrality regulation sparked intense political debate about how the internet should be governed, in particular how ISPs handle and price content transmission. But the internet’s rapid evolution, the ISPs vertical integration into content, the bargaining power of the tech and media giants and anticipated 5G investment returns largely supersede regulatory shifts.
Emerging Market Performance Dispersion Set to Rise After Strong 2017
Emerging markets have benefitted from both improving fundamentals and bullish sentiment driving inflows to the asset class. Individual country risks, however, are poised to rise. Be selective.
China's Slow Recovery from Debt Hangover Begins
Growth in the country's corporate debt load has finally leveled off this year as financial conditions and regulatory oversight tighten. That's good. But rebounding returns on incremental assets and common equity are even better.
China’s Central Bank Chief Warns of “Minsky Moment”
Zhou Xiaochuan appeared to be talking about China, given his contextual warnings about the country’s high corporate and rising household debt loads. But the message may apply to frothy and debt-laden markets globally.
As India Crosses the Digital Divide, a New Era of Investment Opportunities Dawns
India has implemented measures that combined should generate a surge in economic growth, corporate earnings, and double-digit annualized stock returns over the next decade.
As Fed’s QE Dismantling Begins, Questions Around Growth, Asset Prices Linger
Fed’s balance sheet unwind comes amid mixed U.S. data, but the global acceleration in growth and inflation gives it cover to continue normalizing policy and reduce market distortions. The upswing might also give pause to those asserting the death of the Phillips Curve.
Investing In EV Carmakers and Supply Chains? Utility Work Ahead
Future growth projections for electric vehicles vary dramatically, but all reflect real opportunities for fundamentals-focused investors surveying the links in supply and production chains.
North Korea, U.S. Rhetoric Rattle Markets, But Investors Should Ignore the Noise
Geopolitics is shaking global markets, with the epicenter of the latest tremors coming from the Korean Peninsula. Fiery rhetoric out of Pyongyang is nothing new. But it is certainly novel coming from the Oval Office.
Breaking Down the Presumed Correlation Between Commodities and Emerging Markets
The divergence this year in the performance of the emerging markets stock index and commodities prices reflects improved earnings quality and valuations of developing country stocks, not to mention big changes at the top of the index.
More Overseas Outperformance May Be In Store
As outflows hit U.S.-focused equity mutual funds, international and emerging market stock funds are seeing massive inflows, bolstering strong share price performance of overseas markets this year. Despite the investor rush abroad, plenty of upside could remain.
The Incentive Factor Behind MSCI’s China A Shares Index Inclusion
MSCI has taken a cautious approach to A share inclusion that encourages China to increase foreign investor access and ultimately ability to redeem and repatriate funds in exchange for greater future index weightings. It’s a sensible plan.
Yellen at the Markets: Don’t Worry. Low Unemployment to Trump Transitory Low Inflation
Fed hikes rates again, even as inflation falls further from target and financial conditions continue to ease. Smooth sailing ahead? Beware the leverage risks building below the surface.
Parsing Long/Short Equity Liquid Alts Performance, Fees and Net Exposures
Investors interested in long/short equity mutual funds would be well advised to consider more than their much-more competitive fees vs. private hedge fund peers. To genuinely hedge the long components of a portfolio, look for lower net long exposures in a long/short equity allocation, and added value on the short side even in rising equity markets.
South Korea Tacks Left With New President, But Stocks Have Other Drivers
Political pressure on the chaebol is poised to rise, but corporate governance efforts already underway and end-market demand have proven tailwinds that have so far trumped politics.
House Passes Health Care Reform, But the Senate’s Prescription Likely to Vary
In this Q&A, Thornburg’s Connor Browne doubts the Senate will pass the House’s American Health Care Act (AHCA) in its current form, and is cautious that the status quo may even prevail.
Trump Trade? The More Likely Reflation Trade is in Europe
Political risk may have ratcheted lower after the first round of the French presidential election. But the latest jump in asset prices across Europe appears to have tailwinds well beyond politics.
ETFs’ Total Costs Underappreciated
ETFs can have significant costs that aren’t entirely evident in expense ratios. From transaction to holding costs to ETF composition, the total costs of ETFs can be a significant drag on returns, which are coming under the microscope, as are the robo-advisors that typically use them.
Investors Should Look Beyond South Africa's Unfolding Political Drama Now
President Zuma's sacking of his market-friendly finance minister amid a broader cabinet reshuffle has spooked markets, creating attractive entry points for longer-term, valuation sensitive investors.
Market Shrugs off Fed Rate Hike Warning
The Fed’s signals that rate increases could soon come seem to fall on deaf ears. U.S. stocks continue to climb as bond yields decline. Although recent data reflect accelerating economic growth, which is necessary to justify frothy valuations, structural challenges and unclear policy outcomes remain. Caveat emptor.
OPEC’s Deal Drives Oil Prices Up a Slippery Slope
Oil prices jumped sharply in the wake of OPEC’s pact to cut production, but the market might wait to see implementation of the output reduction. OPEC’s quota compliance history and current market supply and demand dynamics don’t necessarily support sharp climbs in oil prices.