Energy

CIO Larry Adam discusses the COVID-19 outbreak and emphasizes that investors should exercise patience, not panic.

To say that a lot has changed in the last month is a tremendous understatement. The markets are playing a weak supporting role to the worst healthcare challenge in our generation, as well as the worst economic problem since 2008.

As risk assets tumbled in late February and March, it intensified the focus on risk management: How can multi-asset strategies defend against turbulence while positioning for an eventual rebound? The answer: Be ready to adapt—and to do it quickly.

According to John Sheehan, the recent selloff in Investment Grade fixed income was exacerbated by technical factors. In his view, regulatory changes implemented after the 2008 crisis removed a critical shock absorbing mechanism that caused spreads to spike.

From its all-time high on February 19, the S&P 500 hit a bottom of 2,237 on March 23. But it will go lower this year, according to Jeffrey Gundlach, and only then will he buy stocks.

In a typical recession, the global economy tends to have large imbalances that take a long time to unwind, such as a housing bubble or overinvestment by businesses. This time the global economy is experiencing a shock, rather than the natural end result of a slow build-up of excesses.

The pace of government and private sector response will likely be slower than we may like, but we have the collective knowledge to address the pandemic, including support to individuals and businesses.

Much will depend on how fast businesses bring back jobs.

The Bloomberg Barclays U.S. Green Bond Index is down 2.5% so far this year -- far less than the 5.1% drop seen in the investment-grade, corporate debt benchmark.

Not everyone sees the bottom as necessarily reached.

This article will tackle the big news. Saudi Arabia announced that it will increase oil production from 9.7 million barrels a day to 10 million and then to 12 million if needed. This news alone sent the oil price down 20% – and the whole stock market with it.

The majority of the time, when you hear someone say “I bought it for the dividend,” they are trying to rationalize an investment mistake. However, it is in the rationalization that the “mistake” is compounded over time. One of the most important rules of successful investors is to “cut losers short and let winners run.”

Michael Grant is preparing for rebound in equities and has positioned the long/short portfolio accordingly. To use a Wayne Gretzky analogy, he is skating to where the puck will be, not where it is.

On Friday, Congress approved and President Trump signed into law a $2.2 trillion emergency stimulus package, the largest in U.S. history. Most American adults will be receiving a one-time payment of $1,200 in cash.

Personal Income (excluding Transfer Receipts) in February rose 0.61% and is up 3.7% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was up 0.52%. The real number is up 1.9% year-over-year.

Sierra Mutual Funds Chief Investment Officer Terri Spath's latest market commentary discusses when might be a good time to buy, and the importance of using a time-tested process, like the one used at Sierra and Ocean Park.

Global markets have not yet reached a bottom, but Nick Niziolek believes the global economy and markets could be in recovery mode by the second half of the year, with China and other overseas markets making strong contributions.

As both traditional and alternative asset markets descend into turmoil this month, it’s important to remember the inherent strengths of a diversified portfolio. A market rout always causes correlation to go to 1 across virtually all assets as investors flee to the perceived safety of cash.

I expect that the most valuable aspect of our investment discipline over the completion of this cycle will be our ability and willingness to flexibly respond to changes in observable market conditions as they emerge.

A global recession is likely through the first half of the year, with a rebound possible during the second half of 2020, provided the virus threat subsides.

Oil’s back below $30 and suddenly it feels like 2016 all over again. Only it’s not. Saudi Arabia’s 2015-2016 production boom was a war on US shale. This time, Saudi Arabia is waging a war for market share against Russia and the US. It’s a war with no winners, least of all US fracking.

That was the last time the world witnessed a sustained downturn in both emerging markets and their developed-nation counterparts.

We know a lot more about COVID-19 than we did a few weeks ago; but there remain questions that are unanswerable at this stage. We don’t know how much worse this gets before it starts to get better...

Hopes for a pact between Texas oil and OPEC have begun to unravel.

Given the magnitude, and multiple confirmations, of these signals, it is far too soon to assume the “bear market” is over. This is particularly the case, given the selloff is less than one-month old.

The impact of the coronavirus on the US economy still isn’t fully known yet, as the situation continues to evolve. However, Franklin Equity Group’s Grant Bowers sees at least three reasons to be optimistic about the long-term recovery.

We entered into the current crisis with a whole financial system that had been incentivized by policymakers to take on excessive levels of debt and leverage. The turmoil we are seeing right now is the result of the unwinding of this leverage.

These extreme measures appear to be having great success, particularly in Asian countries. Whereas the number of cases continues to rise in Italy, Spain, Iran and elsewhere, the number has begun to stabilize, if not plateau, in Asian countries.

Growing policy responses reflect greater estimates of the costs of COVID-19.

Growing policy responses reflect greater estimates of the costs of COVID-19.

After an initial cover-up and more than 3,000 deaths, China appears to have brought COVID-19 under control, just as the spread of the coronavirus is accelerating across the U.S. and Europe. With China's domestic-demand driven economy set to rebound and mainland investors avoiding the panic that has smacked western markets, its economy could put a floor under global growth and offer a safe haven to investors.

We expect to see a combination of anti-viral medications and vaccines develop over 6 to 12 months globally. We are seeing daily positive articles on the effectiveness of anti-virals from other countries. Vaccine development appears to be moving very quickly, and there is potential for a vaccine to get to people as soon as the end of 2020.

That was President Donald Trump on Monday, responding to a question on whether the U.S. economy could be sliding into a recession.

While it is certainly hoped by many that we are closer to the end of the liquidation cycle, than the beginning, the dollar funding crisis, a blowout in debt yields, and forced selling of assets, suggests there is likely more pain to come before we are done.

On Thursday, March 12, Rick Raczkowski, co-lead portfolio manager of Core Plus Fixed Income participated in a conference call with clients to discuss recent events and market activity. He discussed that while there is a lot of fear and uncertainty in the market right now he and co-lead portfolio manager Peter Palfrey, are maintaining their discipline of managing through the cycle as they have for the past 20 years.

On Friday, March 13, Loomis Sayles’ Global Fixed Income team held a conference call to discuss the current market environment, policy responses and potential opportunities. Here, portfolio managers Lynda Schweitzer and Scott Service summarized a few key points.

Futures are now at the lowest level in almost two decades after Saudi Arabia signaled it’s doubling down on a price war with Russia just as demand evaporates

As COVID-19 spread around the world in the early months of 2020, governments enacted quarantines, travel bans, school closings and other measures. Global supply chains were disrupted. Reduced demand is weighing on many industries, starting with travel, hospitality and leisure. Oil prices dropped after Saudi Arabia boosted production, in effect launching a price war with Russia. U.S. Treasury yields fell to record lows.

In recent weeks, COVID-19 has led to escalating economic concerns. What started as a seemingly sharp, but likely temporary, reduction in Chinese activity, including disruptions to global supply chains, became more worrisome as the coronavirus moved to the rest of the world.

Municipal closed-end funds (“CEFs”) currently offer high levels of tax advantaged income and can often be purchased at a discount to their current net asset value.

As coronavirus-related market volatility expands into municipal bonds, the Franklin Municipal Bond Department explains how they are navigating an increasingly challenging muni-market environment. They also share reasons why they believe a longstanding preference for high-quality municipal bonds supports their efforts to turn volatility into opportunity.

Gundlach’s survey of the economic and financial destruction wrought by the coronavirus shows problems abound.

A number of cash-rich family offices poised to benefit from tumbling markets.

Month-over-month nominal sales in February decreased by 0.5% (0.53% to two decimal points). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, decreased by 0.6% (0.62% to two decimal points).

This year feels so much like late in 1981, late in 1999 and late in 2008 to us. The first reaction by investors was to flush whatever they had left in economically sensitive stocks. Then, as if there hadn’t been enough torture for value investors today, Saudi Arabia decided to chop the knees out from under the oil industry in the U.S.

A déjà vu of 2008 in markets lately? Mike explains why we think the coronavirus shock should not spark a 2008-style crisis.

The latest crash in oil prices is threatening to push $140 billion of investment-grade energy debt over the edge into junk.

Some clients want to free up cash for investment opportunities, others to offset the cost of margin calls after borrowing against stock holdings.

We have a full economic calendar. Only the FOMC decision will get major market attention. Initial jobless claims provide a post-virus look at the job market. Housing data remains interesting. Despite this, the media focus will remain on the coronavirus crisis.

In terms of excitement, investing usually rivals watching paint dry. That has not been the case lately.

What happens to environmental, social and governance-oriented investment in a market shock? We’re about to find out.

The market for funds that focus on environmental, social and governance investment principles has ballooned in recent years with more than 1,000 opening since 2015.

Coronavirus is a global pandemic that few if any could have predicted, but it’s deteriorating fundamentals throughout 2019 into 2020 that set the table for the recent extreme market volatility. Now that volatility has clearly arrived, what‘s the strategy when black swans swim?

Stocks rebounded on Friday, ending a week of wide swings that drove major U.S. stock indexes into bear-market territory. Overall, it was a rough week for the stock markets.

In recent weeks, we’ve seen economic concerns about COVID-19 moving from supply chain disruptions, to expectations of softer global growth, to fear of the impact from social distancing. The odds of a recession have been rising day by day. Some economists believe that we’re already in one.

Substantial fiscal policy is the best economic prescription for COVID-19.

Falling oil prices can be a double-edged sword in terms of economic impact: welcomed by consumers, but not by producers. Franklin Templeton Emerging Markets Equity’s Bassel Khatoun shares his thoughts on the impact of lower oil prices on emerging market economies and some considerations for investors

Compared to past viral outbreaks, COVID-19 appears to be less fatal, yet it has received far more media coverage. Paradoxically, that may be part of the reason why it’s had a much bigger impact on public health and the economy relative to those other diseases.

The coronavirus could take us all someplace we really don’t want to go.

The Loomis Sayles Alpha Strategies team shares some insights as markets grapple with three issues: the impact of COVID-19, an oil fight and a crisis of confidence in Western governments.

Stocks have plummeted this month as investors struggled to assess what impact the COVID-19 coronavirus may have on the economy.

The S&P 500 triggered the week’s second trading halt by falling more than 7% during Thursday’s market hours.

The Tax Policy Center estimates that income taxes would go up for all Americans, but the largest raises in both dollar and percentage amounts would be on the wealthiest.

One of the highest-ranked money managers in the world of ethical investing never expected to work in finance. He is part of a new class of portfolio managers that’s feeding a growing investor population desperate for cleaner returns.

A pandemic-driven global recession is becoming more likely by the day as the flow of goods, services and people face ever-increasing restrictions and financial markets slump.

Long-term perspective is key as coronavirus and falling oil prices roil markets. Members of the Matthews Asia investment team share their insights and outlook amid volatile markets.

We highly suspect that we have seen the highs for the year. Most likely, we are moving into an environment where portfolio management will be more tactical in nature, versus buying and holding. In other words, it is quite probable that “passive investing” will give way to “active management.”

U.S. stocks fell again on Wednesday, with the Dow Jones Industrial Average closing in bear market territory.

The markets seem to be vacillating between concerns for the extent of economic damage and hopes the federal government will intervene to stimulate the economy or support certain businesses affected most by the spread of the coronavirus.

As the oil surplus builds, we expect U.S. crude oil to linger at $30-$40 per barrel for the next several months.

Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.

The VIX index has spiked. Over more than twenty years, VIX spikes have been excellent guides to when to put money to work in EM fixed income and equities. Investors have, on average, generated 262bps of excess return in EM fixed income and 234bps of excess return in EM equities by putting money to work during VIX spikes relative to a ‘timing agnostic’ investment strategy.

With markets reeling from concerns over the coronavirus and plummeting oil prices, the US Federal Reserve took another step Monday to shore up markets. The Fed has more in its toolbox, but fiscal policy may also be needed to fill a gap in the US economy.

Financial markets across the globe have been dealt a one-two punch—the spread of the coronavirus and an oil price war that caused prices to plummet. Glenn Voyles, Matt Fey and Bryant Dieffenbacher of Franklin Templeton Fixed Income examine the impact on high-yield credit.

One of the keys to the outlook here is the ability of businesses to get to the other side of potentially acute short-term cash flow problems. Fiscal policy holds the necessary antidotes in its ability to provide targeted, material support to impacted sectors.