Amid a massive return since the March low, the default rate has nearly tripled from year-ago levels as recovery rates deteriorate. “Kicking the can down the road” as vulnerability grows.
Thornburg’s investment team keeps an eye on the macro but focuses squarely on the fundamentals and portfolio fit of each stock and bond selected. This July 17 macro overview is a sample of an internal weekly note to our distribution team that features big-picture highlights from the week that was.
Supporting the beaten-down labor market is the Federal Reserve’s “major focus,” not inflation nor risk asset prices. Doing “whatever we can and for as long as it takes.”
Investing is inherently complex. U.S. Treasury yields far below longer-term averages and compressed credit market spreads make fixed income challenging. Equity can generate attractive returns, and considerable volatility. Market Insights is Thornburg’s window into how we think about risk, reward and the myriad factors that drive risk-adjusted returns.
Amid a massive return since the March low, the default rate has nearly tripled from year-ago levels as recovery rates deteriorate. “Kicking the can down the road” as vulnerability grows.
Thornburg’s investment team keeps an eye on the macro but focuses squarely on the fundamentals and portfolio fit of each stock and bond selected. This July 17 macro overview is a sample of an internal weekly note to our distribution team that features big-picture highlights from the week that was.
Supporting the beaten-down labor market is the Federal Reserve’s “major focus,” not inflation nor risk asset prices. Doing “whatever we can and for as long as it takes.”
Coronavirus has sent economies swooning, toppling consumer price indices. Rebounds in stock and bond markets on policy stimulus don’t mean market volatility is over, or that inflation is dead.
A review of academic research on actively managed funds backs data on active manager outperformance during February’s coronavirus-fueled markets fallout.
COVID-19 and the socio-political responses to it present an opportunity for both market timers, those who try and trade around the shifts in market direction, and long-term investors.
The Fed chopped its key rate after equities and bond markets tanked last week. The move risks fueling already frothy risk asset prices amid weakening global growth due to COVID-19, which has badly disrupted global supply chains and increasingly damped some services industries.
Coronavirus-induced market volatility is another in a long string of blows to the global economic recovery. But investors should look through the disruptions for free-cash-flow companies with healthy balance sheets and resilient, if not robust earnings.
While the Fed met expectations in its latest interest rate reduction, it signaled that hikes are a long way off.
Recent stress in repo markets reflect the confluence of a shrunken Fed balance sheet amid steady economic growth and increasing capital and liquidity regulations on banks.
A rising Treasury yield amid better economic data, easing macro risk and a few more monetary injections may be spurring the rotation. Corroborating, so far, a “mid-cycle adjustment”?
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.
As downward pressure on negative bond yields builds, a flexible approach helps in the search for attractive, relative values.
The Fed is tasked with keeping prices stable, unemployment low and long-term interest rates moderate. The monetary alchemy with such unstable elements is coming under review.
Big-ticket, ultra-short notes force muni SMAs with low minimums to buy longer-term paper at rich prices, likely giving clients more heartburn than total return.
Spectacular first-quarter market returns are quite a bounce back from the December 26 lows, when all anyone could think of was fleeing risk exposures. Many markets saw their best quarter...
Turns out price matters for excess returns, and that what’s worked before doesn’t necessarily persist into the future. “Many factors aren’t real.”
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.
While investors should be cognizant of the complexities and risks around Brexit, they should be just as aware of the opportunities in select U.K.-based businesses.
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 U.S. Federal Reserve has roiled markets with its latest rate hike and comments from Chairman Jerome Powell, who disappointed many investors as insufficiently dovish in his December 19 remarks.
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.
Conventional market wisdom two years ago didn’t look right for long, as gains in industries seen as politically favored faded while one sector expected to suffer quickly rebounded.
Preparations ahead of a hurricane and rebuilding after it temporarily boost tax receipts in affected areas. But longer-term effects on muni markets are usually negligible.
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.
High-yield returns have been great lately, as technical flows, fundamental factors and good economic growth align. But tight spreads, lofty net leverage and event risk don’t make for smooth sailing ahead.
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.
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.
The volatility of short-term rates, however, means the variable rate structure isn't a silver bullet.
Team performance matters more than star players or a large resource base. And in a rapidly changing world, Totaalvoetbal can help teams adapt.
Risk to the euro resurfaces in an unlikely governing coalition and challenging economic agenda, but Italy’s top stocks don’t face the same perils as its government bonds.
High-quality bonds and defensive stocks are on the ropes. And U.S. blue-chips look poised to roll over, if history is any guide. But what if it isn’t?
Bond supply is plummeting, but so is demand. And rates are rising. Where are the silver linings?
Stocks slide on rising rates and yield curve inversion concerns, but a recession doesn't look likely, judging by other economic data and the high-yield bond market.
Facebook’s margins could ebb this year, but they remain at elevated levels and profits could still grow meaningfully.
While U.S. tech giants are effective monopolies, they are so in an unconventional way, making taxing them easier than breaking them up.
Not necessarily the Fed, whose own research suggests wage growth is not a reliable indicator of future inflation. But markets, it appears, aren’t sure what to think.
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.
At the beginning of every year, a number of investment professionals at Thornburg voluntarily place their informal, internal-only bets on which three securities—from stocks to currencies or other financial assets—might together produce the best beta-adjusted returns in the year ahead. In 2017, the winner was Sean Sun, whose three picks included bitcoin. The cryptocurrency skyrocketed last year, of course, helping Sean win the prizeless competition by a wide margin.
Four-hundred million Chinese millennials will soon account for more than half of China’s domestic consumption. As a group, they are larger than the working populations of the U.S. and Western Europe...
As third-quarter earnings season gets underway in earnest this week, equity market participants are expecting company fundamentals and reported results to be larger drivers of performance for large...
The U.S. Federal Reserve has announced the October start of the slow reversal in the unprecedented expansion of its balance sheet following the 2008 Global Financial Crisis. Chairwoman Janet Yellen...
The Iditarod is considered one of the world's most grueling and dangerous races. Sled dogs travel 1,100 miles through increasingly treacherous arctic terrain. The dogs and mushers traditionally run the entire day and then rest at night...
Can long/short alternative equity strategies work as a “bridge” between equity and fixed income? It’s an interesting question recently posed to us by a wealth advisory team. Both asset classes become...
Most U.S. risk asset prices have enjoyed a long ride higher amid slow-but-steady economic growth, scant inflation and still ample central bank monetary support. But if fund flows are any indication of...
A common misperception is that American depositary receipts, which bundle ordinary shares of an overseas-listed company into a U.S.-traded security, don’t carry currency risk. Driving the confusion is...
When the curators at Merriam-Webster convene to select their Word of the Year for 2017, they might consider “Amazonization” for their short list. Since the June 15th announcement of Amazon’s...
How smart are “smart beta” products? As factor-based investing is the latest fashion in the allocation trend to passive exchange traded funds, the performance of the most popular among smart beta...
In the early 1960s, a meteorologist undertook a mission to predict the weather. Unique to his approach at the time was his extensive use of computers to assist in the predictions. He began running...
Bank loan funds have been widely touted as a great way to help fixed income investors ride out a rising interest rate cycle. Also known as levered loan or senior loan funds, they are, after all, high...
After years of excellent equity returns at home, U.S. investors appear increasingly interested in moving their chips into less crowded trades abroad, where economic growth is on the upswing, earnings cycle...
Despite weaker economic data of late, the U.S. Federal Reserve matched market expectations in raising its benchmark interest rate June 14, 2017 a quarter point, setting its new range to a still highly...
"When a measure becomes a target, it ceases to be a good measure." This insight comes from economist Charles Goodhart, whose precept refers to the tendency of individuals or organizations...
It's the Rorschach economy. After much weaker-than-expected U.S. first-quarter gross domestic product (GDP) data, it seems economists' views range from....
European asset prices have surged since independent Emmanuel Macron emerged as the decisive winner in the first round of the French presidential election...
Morningstar’s director of exchange-traded fund research penned an interesting article April 12 on the total cost of ETF ownership, which we also wrote about in a recent article examining the latest...
The U.S. Federal Reserve has released the minutes from its March monetary policy meeting, suggesting that the unwinding of trillions of dollars in debt on its balance sheet could start later this...
Recently, much has been made about the divergence between hard and soft data on economic fundamentals in the U.S. On March 28, the Conference Board reported that its consumer confidence...
The U.S. Federal Reserve shifted gears at its March 15, 2017, monetary policy meeting, lifting its key Federal funds rate a quarter-point to a 0.75-1.00% range. Although the increase was widely flagged...
After leaving its benchmark interest rate near zero for eight years and then lifting it just once in each of the last two, the market has grown accustomed to discounting U.S. Federal Reserve indications...
In the wake of Donald Trump’s November electoral victory, investors focused on his pro-growth agenda of tax reform, deregulation and infrastructure spending, not on his protectionist and...
Markets this year have gotten off on the right foot. Over the first three weeks of 2017, the S&P 500 Index added 1.3% to its 12% gain in calendar 2016, while the Bloomberg Barclays U.S. Aggregate...
Many investors might see bank loans as “fixed income” without duration risk, given their floating-rate structure. They may use them as a way to reduce their exposure to rising risk-free rates without...
Recent municipal bond market movements mark a transition from a period of significant overvaluation to fair or even under-valuation. This can be a painful process for muni market...
The December U.S. jobs report wasn’t particularly surprising, though a couple of nuances are worth considering for fixed income investors. While the economy added 156,000 jobs, which was a bit...
