Search Results
Results 451–495
of 495 found.
Bank Loans: Looking Beyond Interest Rate Expectations
Fixed income investors may be stymied by the current mix of interest rate projections and global macroeconomic news. Interest rates remain near historical lows, and investors continue to move between risky assets and relative safe havens like Treasurys based on the latest market headlines. We believe that bank loans can be a compelling addition to fixed income portfolios in this environment and, more importantly, over the long term.
Fiscal Cliffhanger
In the famous 1955 movie Rebel Without a Cause, troubled high school student Jim Stark (played by James Dean) winds up playing a game of chicken with his classmates. The US economy is at risk of driving, so to speak, over a "fiscal cliff" starting January 1, 2013, an event that threatens to wreck the economy. There are fewer than five months to avoid going over this cliff.
Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps
by Thomas Fahey of Loomis, Sayles & Co.,
Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before. If this is indeed another rerun, we should expect central bank and other policy responses to help limit the fallout. As we see it, hesitancy and solvency traps are the main obstacles to recovery.
Equity Market Review & Outlook
Following back-to-back double-digit quarterly gains, US stocks took a breather in the second quarter, with the S&P 500 Index declining 2.8%. It could have been worse. At the quarters low point in early June, the Index had declined 10.0% from the first-quarter close. June was a strong month for stock performance, leading to a welcome recovery from the early quarter decline. However, positive returns from the first quarter prevented the Index from becoming negative on a year-to-date basis.
Bond Market Review & Outlook
The liquidity-driven rush into riskier assets that dominated the first quarter faded during the second quarter. The European sovereign debt and banking crisis was once again the primary catalyst, but softer economic data in the US and China also fed negative investor sentiment. Global liquidity suffered following the end of the European Central Banks (ECBs) long-term refinancing operation (LTRO).
Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps
by Thomas Fahey of Loomis, Sayles & Co.,
Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before, during the summers of 2010 and 2011. If this is indeed another rerun, we should expect central bank and other official policy responses to help limit the fallout. As we see it, hesitancy and solvency trapsnot a liquidity trapare the main obstacles to a lasting economic recovery.
Dividends: A Timeless Component of Equity Return
With interest rates at historic lows and many dividend-paying stocks boasting yields comparable to or higher than US Treasurys, it is no wonder that dividends have recently been at the forefront of many investors minds. But dividends have a long history as a significant component of total return, and todays buzz is just the most recent chapter. Stripping away the noise, what should investors consider as they survey the universe of dividend paying companies? We believe dividend payments are poised to grow in 2012, likely faster than earningsper-share growth.
Bond Market Review & Outlook
by Thomas Fahey of Loomis, Sayles & Co.,
Central banks around the world sent a rush of liquidity into the global financial system, and this coordinated effort helped stem the risk of a major European credit crunch that was brewing at the close of 2011. In our view, the liquidity provision has improved the macroeconomic outlook and buys some much needed time for sovereigns, banks and other indebted private sector agents to try to get their balance sheets in order. Risk assets have generally responded very well to easy money policies over the last two quarters, while negative real interest rates have piqued the global thirst for yield.
Equity Market Review & Outlook
Looking out to year-end, Congress and the White House will be required to act on a long list of expiring tax measures and a debt ceiling increase is necessary as well. As we saw in 2011, compromise is very difficult to achieve and the elections introduce another level of uncertainty. However, the markets current attractive valuation builds in some of these risks. Beyond our shores, there is always the possibility of disappointment in Chinas growth trajectory, and further serious challenges with weaker members of the euro zone should be anticipated.
Revisiting the Liquidity Cycle with the Minsky Model
by Thomas Fahey of Loomis, Sayles & Co.,
Once an extreme event occurs, standard models offer limited insight as to how the ensuing crisis could play out and how it should be managed, which is why policy responses can seem disjointed. The latest policy responses to the European crisis have been no exception. To understand and respond to a crisis like the one in Europe, perhaps we need to consider some new models that include the human factor. Economic historian Charles Kindleberger can offer some insight
Equity Market Review & Outlook
We recognize that fundamental conditions in the euro zone and the aging US economic recovery make the 2012 earnings outlook somewhat less clear and less robust than it was in 2011. While equity valuation appears supportive and US economic data is moderately improving, unexpected events can upset the balance making for greater than desired volatility, as seen in 2011. We believe equity performance for 2012 will hinge as much on macroeconomic developments as on company-specific business execution. A trading range both above and below current levels should be expected for 2012.
The Global High Yield Opportunity
The shifting characteristics of US, European, Asian and emerging markets high yield assets have contributed to an expanding opportunity set. This has prompted many institutional investors to broaden their high yield investment guidelines, often giving portfolio managers the ?exibility to include exposures to these markets within one portfolio. The days of silo investing, in which non-US investors sought exposure to US high yield and emerging market debt through separate mandates, may be giving way to an era of sector allocation driven by investors.
Five Policy Prescriptions for Europe
by Tom Fahey of Loomis, Sayles & Co.,
The European sovereign debt crisis is chronic. It can not be resolved until countries can demonstrate the ability to grow and improve their budget deficits. The immediate need is to stop Europe from hemorrhaging risk into the global financial markets. That can only be done by the ECB because it is Europes most effective and high profile euro-area institution and the banking systems only lender of last resort. Until the ECB steps up to commit sufficient liquidity, the overall septic conditions of European risk will likely continue to infect the global capital markets.
Nowhere to Hide in the Third Quarter
The S&P 500 has traded within a range of about 1,100 on the low end to 1,230 on the high end since the sharp decline of July and August. Complicating the outlook, however, is the fact that many stocks and indices have made new lows since their early August lows, suggesting the S&P 500 could do the same. Fundamental conditions make the 2012 earnings outlook far cloudier than it was one or two quarters ago.
Bond Market Review and Outlook
by Thomas Fahey of Loomis, Sayles & Co.,
Amid the ongoing debate, the financial markets are signaling a need for liquidity. Until Europe and the US are able to demonstrate economic growth, the financial markets are likely to remain skittish, leaving risk premiums high. In the interim, policy-makers will be in the spotlight. In our opinion, central banks should supply more liquidity on a global basis in this turbulent environment. We believe such intervention can help assuage the markets.
The H1:2011 Economy may have been Stronger than we Thought
A key sector is the nonfinancial corporate sector. It excludes government, noncorporate small businesses, farmers, nonprofits, owner-occupied housing, and banks and insurance companies. Real output in the nonfinancial corporate sector surged a hot 4.5% in Q1 and a red-hot 7.5% in Q2. The weakness in the economy is predominantly in housing, banks, government, and small business. Overall, nonfinancial corporations have been doing well. Output in that sector has matched the prior peak of Q4:2007. Hows the economy doing? It depends on whom you ask. Dont count it as a lost cause just yet.
The US Financial Sector in an Environment of Turbulence
by Team of Loomis, Sayles & Co.,
US financial companies have spent the past three years trying to improve their balance sheets. We saw this trend reflected in company reports of asset quality improvements, increasing capital and strengthening liquidity. Heightened anxiety about the European debt crisis, a potential slowdown in the global economic recovery and the US credit downgrade appears to have overshadowed financial company fundamentals. Fundamental improvements by financial companies have fortified the sector, leaving it substantially stronger than in 2008. Currently, we think financials are well positioned.
The European Debt Crisis: Key points to consider
A toxic combination of factors contributed to the recent selloff in risk assets and the sharp decline in German and US government bond yields. The lingering European sovereign debt crisis, exacerbated by political bickering, weak economic data and doubts about the potential effectiveness of monetary and fiscal policy tools, fed investor anxiety. Ever since Greece requested its first rescue package in May 2010, the European sovereign debt crisis has been simmeringwith occasional flare-ups.
Equity Review: Stocks in Correction Territory
Equity markets have historically provided long-term investors one or perhaps two significant entry points each year. Typically, such opportunities present themselves when fear is high, forecasts are in question, and investors are taking strong defensive action. While I cannot rule out somewhat lower prices before stocks stabilize, the 15% decline in the S&P 500 is severe, and in our view, a probable over-reaction to recent headlines. I continue to believe that a year from now, achieving notably higher equity prices from current levels is a likely outcome.
US Treasury Downgrade
Given the nature of how the political system is handling the fiscal situation and the views of the rating agencies, I could make a strong case that there will be no downgrade by Moodys or Fitch before December 2011. But Treasurys are likely to remain on a negative outlook. I dont think that S&P will issue another downgrade this year. If Congress fails to follow through on recommendations from the Super Committee, we could get a downgrade from Moodys or Fitch. Congress has a strong incentive to implement the recommendations from them in order to help avoid automatic spending cuts.
US Credit Rating Downgrade Q&A
by Team of Loomis, Sayles & Co.,
Will foreign investors, who own almost half of US Treasurys, suddenly lose confidence in the US? We think not. The US is not the only nation struggling with a debt burden. But the US Treasury market is the largest, deepest, most liquid bond market in the world, by far. Investors may talk about diversifying their holdings away from the US dollar, but it is tough to execute. This is particularly true for countries who wish to maintain a fixed exchange rate or manipulate their currencies.
June Bugs...in the Employment Report
The June 2011 Employment Report was awful. But what are we to make of it? I drilled down into the details trying to make sense of it. The Employment Report from the Bureau of Labor Statistics (BLS) gives results from two different surveys of the labor market, the Establishment Survey and the Household Survey. Newspaper headlines focused on results from the Establishment Survey, from which we learned that nonfarm payrolls rose a lousy 18,000 in June from May. Private-sector payrolls rose 57,000, but government payrolls fell.
Equity Market Review & Outlook
In many ways, 2011 feels like a repeat of 2010, as the economy has hit a bit of a soft patch, the Federal Reserve?s quantitative easing program has come to an end, and the eurozone is faced with serious sovereign financial concerns. Stocks have pulled back, but the decline has been much more moderate than in 2010, in part because the corporate earnings cycle remains firmly positive. Companies have continued to exceed analyst estimates more often than not, and we expect the upcoming quarter to produce another round of good earnings reports.
Bond Market Review & Outlook
We are experiencing a case of dj vu with another economic soft patch and a Greek solvency crisis. We saw this movie in the spring and summer of 2010, but then we got a major policy response (a European bailout, QE2, and tax cuts) that helped lift us out of the doldrums. There is no major policy response coming in 2011. In fact, many countries are pursuing tighter macro policies by raising interest rates or cutting public spending to reduce swollen budget deficits. The European response to the sovereign debt crisis has been messy, and that has been a major contributor to the recent anxiety.
An Updated Perspective on Japan
More than a month after the massive earthquake and tsunami that buffeted Japan, the nation is still grappling with humanitarian and nuclear crises, and persistent, destructive aftershocks. It is still difficult to quantify the damage precisely. The number of lives lost and the costs to rebuild the country?s infrastructure are staggering and have been rising steadily. Japan?s nuclear crisis and resulting power shortages remain critical variables for the country?s humanitarian effort and industrial recovery.
Equity Market Review and Outlook
The global equity bull market continued in the first quarter despite significant global strife. Most major US indices posted total returns of about +5.0% to +8.0%. Continuing the trend since the March 2009 low, small cap and mid cap stocks outperformed their larger brethren. US markets were among the best in the world, although the MSCI World Index also posted a solid gain of 4.9%. Emerging markets were among the weaker equity asset classes. As the returns demonstrate, however, emerging market stocks remain the winners by a wide margin over the past five- and ten-year periods.
Not all Bonds are Created Equal
It has become the question of the day: If interest rates are heading higher, shouldn?t I bail out of bonds altogether? While we anticipate rates will rise, we don?t believe abandoning bonds would be prudent for most investors. Bonds can play an important role in investor portfolios by providing income potential plus diversification. In this piece, we describe why we think rates may be biased higher in coming years and how our portfolio strategies may adjust to the new environment.
Equity Market Review & Outlook
The global equity bull market continued in the first quarter despite significant unrest across parts of Northern Africa and the Middle East, a massive earthquake in Japan, sovereign debt issues in Europe, and inflationary pressures in certain emerging economies. US markets were among the best in the world, although the MSCI World Index also posted a solid gain of 4.9%. Emerging markets were among the weaker equity asset classes. As the returns demonstrate, however, emerging market stocks remain the winners by a wide margin over the past five and ten year periods.
Bond Market Review & Outlook
The power of easy money policy to dampen volatility is evident in the global bond markets. There has not been any systemic credit spread widening or major jump in risk aversion on the back of the significant political upheaval or natural disaster. The collective investor conclusion seems to be that the impact of the losses will not derail global growth, and Japanese reconstruction may even contribute to it later this year. Specifically, Chinese growth still looks on track for a strong year, and labor markets in the US have at last begun to show something like a normal recovery.
Middle East Politics and Oil: The Influences on Global Interest Rates, Credit Spreads & Stock Prices
The market has added a substantial risk premium to the price of oil given the unrest in the Middle East and North Africa. Prices have increased by more than 20% since December 2010; half of that increase occurred during the past three weeks in reaction to unrest spreading to Bahrain, one of the Gulf States. Market participants have raised their probability calculations for black swan events. There may be excess pessimism in the market, as reflected in increased concerns about unrest spreading to the other Gulf States. Those concerns are potentially overblown.
Japan: An Update
Globally, the crisis could lead to higher food and energy prices: Japan will not be contributing to the global food supply, its oil imports have been increasing, and a shift from nuclear energy to gas and other sources is plausible. We believe that in isolation, the turmoil in Japan will have a negligible impact on global GDP; however, if oil prices and unrest in the Middle East and Northern Africa were to accelerate markedly, the confluence of events could hamper global economic recovery.
Multi-Asset Real Return: Assessing & Exploiting Price Pressures in their Many Forms
An asset manager?s challenge is to preserve and grow the purchasing power of investors? portfolios under a variety of economic conditions. Understanding the breadth of global inflationary or deflationary trends that can occur, and the ways different assets might perform in these environments, is critical to this objective. Based on our research, we have determined that no single asset class can protect investors from inflation. On the contrary, we believe the flexibility and diversification offered by a multi-asset-class strategy is necessary to help weather changing inflation regimes.
Duration: Not the Whole Story
Our analysis has shown that drawing on a broad set of quantitative tools to assess a portfolio?s perceived interest rate sensitivity can enhance the decision making process. At Loomis Sayles, iRate Beta is one of many resources?including other analytics, fundamental research and trading insights?for portfolio managers to consider when making investment decisions. By arming portfolio managers with a comprehensive perspective on their portfolios? Treasury sensitivity and risk, we believe managers will be better positioned to consider various investment and hedging strategies.
Growth Investing with a Distinct Perspective
In this paper we outline the distinct elements of our process and philosophy to show how our Large Cap Growth discipline takes the traditional definition of a growth strategy and seeks to infuse it with a quality and valuation focus. These preferences play out in our focus on finding companies with sustainable cash-flow growth and profitability as well as intrinsic value. We believe this helps us exploit opportunities offered by growth companies while tempering the return volatility often associated with growth investing. Our consistent long-term approach has generated a high-growth portfolio.
Equity Market Review and Outlook
Global equity markets continued the uptrend that began in the third quarter and finished the year with solid gains across all major equity categories. Such a powerful second half of 2010 seemed improbable just last summer, when concerns over a potential double-dip recession dominated investor thinking. Other macro issues, such as the ongoing financial challenges within the European Union, remain unresolved. However, these macro concerns have remained manageable in the eyes of equity investors.
Global Outlook and Strategy
by Team of Loomis, Sayles & Co.,
After being challenged in November by renewed Eurozone sovereign debt concerns, global risk markets ended 2010 on a strong note. The key to the late-2010 and early-2011 optimism was the potential for the two biggest engines of global growth ? the US and Chinese economies ? to pull together this year.
Q4 Bond Market Review and Outlook
The US economic picture brightened as policymakers announced additional steps to stimulate the economy. Bond yields rose, causing many sectors of the bond market to lose ground in the final quarter of 2010, though high yield bonds, selected currencies and equity markets roared ahead.
Reframing A Case For High Yield Bonds
by Tom Fahey of Loomis, Sayles & Co.,
Our contention is that high yield bonds are likely to continue to be a respectable store of value. We base this on their valuation profile and fixed income characteristics, which tend to stand out in the midst of a protracted economic recovery and ongoing deleveraging process that could have significant implications for economic growth and yield potential.
Equity Valuation, Earnings and Relative Yield: A Compelling Point in the Cycle?
Large-cap US stocks, as represented by the Dow Jones Average, quadrupled in the 1980s and again in the 1990s. Given this historical perspective, the market?s long pause since 2000, accented by calamitous financial events, particularly in 2008, has left investors impatient and fearful. That said, investors would be wise not to wallow in this sentiment and overlook the long history of stocks returning to good form following lengthy periods of underperformance. The S&P 500 Index could be on the cusp of a positive long-term cycle based on its valuation, earnings and relative yield.
Deflation Economics: Quantitative Easing and the Portfolio Balance Channel
by Thomas Fahey of Loomis, Sayles & Co.,
The level of assets on central bank balance sheets has been relatively stable since the initial burst of quantitative easing in late 2008 and early 2009. As growth slows, however, money and credit numbers could drop significantly. Central banks could still do more to spur a more complete economic recovery. Until then, bond yields should remain low. Perhaps 10-year Treasury yields below 3 percent are low enough to reverse the real demand for money and force portfolio rebalancing. Investors will need to watch the corporate sector for signs of cash hoarding and hiring as evidence of that.
An Investment Strategy for a Market in Transition
The world is entering a period of rising interest rates on a secular basis. While inflation is not a concern in the near term, the seeds of inflation are likely being planted now, even though it could take quite some time for them to overcome powerful disinflationary forces at work today. If anything, the recent events in Europe and the deceleration of global growth suggest interest rates could remain low for longer than anticipated. The economy will likely grow at a disappointingly meager pace, but it will grow nonetheless.
The Global Bond Market: Opportunity or Opportunity Cost
The U.S. bond market is unlikely to offer investors the yield or capital appreciation opportunities they need to meet their investment objectives in 2010. Instead, investors will need to expand their investment universe. Investments in non-U.S., high-quality governments and supranationals could offer capital preservation, while emerging-markets debt and corporate debt might present performance prospects. In the non-dollar securities arena, investors could take advantage of securities offering capital preservation as well as performance.
Multisector Strategies in a Rising Rate Environment
For three decades, the prevailing direction for interest rates was down. This made life easy for bond investors, since principal held up well and even grew for the most part. The cost of these falling rates, however, was steadily lower coupons. One of the best defenses against this reinvestment risk is to maintain a long duration in a bond portfolio with good call protection. The good news is that reinvestment risk appears to be waning as declining interest rates possibly prepare to reverse, and this could create potential for better yields.
A Day in the Life of a Fixed Income Analyst
This article follows a day in the life of Elizabeth Colleran, a fixed income credit analyst covering global telecommunications. News headlines, market movements or new deal offerings can quickly reshape the day of a fixed income analyst. While their day-to-day focus is on company and industry modeling, SEC filings, discussions with company management and industry developments, they must be prepared for whatever is hitting the tape. Reaction time is critical.
The Global Bond Market: Opportunity or Opportunity Cost
The U.S. bond market is unlikely to offer investors enough yield or capital appreciation opportunities in 2010. Investors should instead expand their investments to include global bonds. High-quality governments and supranationals could offer capital preservation, while emerging market debt and corporate debt may present performance prospects. Non-dollar securities could offer both capital preservation and performance.
Results 451–495
of 495 found.