All Stories

What is the State of Corporate Bond Liquidity?

By James Faunce | September 21, 2017

Since the financial crisis, investment grade corporate bond trading volumes have almost doubled. 2017 volumes are projected to total $4.1 trillion, compared to $2.1 trillion in 2007. However this doesn’t tell the whole story – the size of the overall market has tripled over this time period. As a result, liquidity, measured as volumes relative to the overall market, is down quite meaningfully. Today’s chart shows that volumes currently represent 86% of the market while in 2007 they came in at over 120%. This steady decline is due to numerous factors, but a large contributor is the increased regulatory oversight, most notably the Volcker rule which has limited bank investment capabilities.

Stocks Make a New High

By David O'Malley | September 18, 2017

The S&P 500 closed above the 2,500 mark for the first time on Friday. The markets ended a strong week of gains driven by continued favorable conditions for economic growth and the prospects for potentially bipartisan action coming out of Washington.

I’m not an Economist, But…

By Scott Ellis | September 14, 2017

I am certainly not an economist, but when a Barron’s article early in September highlighted an obscure but potentially troubling economic data point, I had to find out more. The Federal Reserve Bank of Philadelphia produces monthly coincident indexes for each of the 50 U.S. states. These monthly indexes describe recent trends and are further combined into a diffusion index value. More specifically, these indexes focus on four state-level indicators to summarize current economic conditions. The variables in this coincident index include nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average) – per the Philadelphia Fed’s website.

Hurricane Recovery and Economic Impact

By David O'Malley | September 11, 2017

The one-two punch of Hurricanes Harvey and Irma has impacted so many in Texas, Florida and throughout the Southern part of the U.S. We keep all of those impacted in our thoughts and wish them a speedy recovery.
Markets will be looking at how these two storms will impact the economy both in the near term and farther down the line. In the short term, the potential is for the storms to put downward pressure on economic performance and distort statistics (like the rise in unemployment claims last week), but the rebuilding process will be a boost to the economy.

Corporate Bond Credit Quality Moving Lower with Yields

By Mark Heppenstall | September 7, 2017

This week’s chart highlights the dramatic shift in credit quality for the corporate bond market during the past 30 years. Investment grade rated corporations have been on a 30-year borrowing binge judging by the increasing weight of BBB-rated credits in the Bloomberg Barclays Corporate Index. U.S. companies are taking advantage of lower and lower borrowing costs and embracing the use of higher leverage. Nearly half of the index is made up of BBB credits today ─ double the level from 30 years ago. Despite more than 60 companies being rated AAA in the 1980s, only Johnson & Johnson and Microsoft remain as the two U.S. companies with the top rating.

Unexpectedly Weak Employment Report

By David O'Malley | September 5, 2017

The nuclear test by North Korea has brought geopolitical uncertainty to a new level. As I have previously written, it is very hard to trade geopolitical risk so I prefer to stay focused on fundamentals.

Last week’s August employment report was weaker than expectations on almost all aspects. The report comes after stronger employment data earlier in the week. The ramifications of the weaker report bring the odds of a December interest rate increase by the Federal Reserve (Fed) to less than 50/50. The weaker average hourly earnings and sluggish inflation data may keep the Fed on hold until after the holiday spending season.

Washington DC, North Korea Have Skew at Multi-Year Highs

By John Swarr | August 31, 2017

Despite the S&P500 (SPX) being less than 2% off the all-time high it achieved a mere three weeks ago, market signals are suggesting that investors are beginning to turn bearish on equities. Turbulence within the Trump administration, the potential for a government shutdown, and tension with North Korea all have investors nervous as volatility starts to pick up after a historically low period the past several months. As a sign market participants are wary of a pullback in equities, traditional safe-haven assets such as gold and the Japanese Yen have been rallying since mid-July.

Geopolitical Risks, Market Forecasts and a Tax Reform Clause

By Mark Heppenstall | August 30, 2017

While trading slowed during the summer months, as it historically does, the headlines did not! From squashed healthcare reform to placing sanctions on North Korea to the Amazon/Whole Foods deal, there was no shortage of market-moving news in the last several months. Before we unofficially say goodbye to summer next week, we checked in with CIO Mark Heppenstall for his take on what’s been happening in the news cycle and its impact on markets as well as what investors can expect leading into the final quarter of 2017.

Uneventful Jackson Hole Meeting Leaves Markets Waiting on Economic Data

By David O'Malley | August 28, 2017

I first want to send my thoughts and well wishes to everyone enduring the impact of Hurricane Harvey in Texas.

Last week’s Jackson Hole Meeting was very uneventful from a market perspective as central banks kept their remarks very much in line with recent commentary. Janet Yellen’s speech felt more like a farewell address than laying out future Federal Reserve (Fed) policy.

The Grind is Real

By Jason Merrill | August 24, 2017

In spite of domestic political unrest and continued geopolitical uncertainty, the markets have enjoyed a surprising amount of stability since September 2016. Spreads have continued to grind tighter and tighter, begging the question, “how low can you go?” When spreads are at the tights across most sectors, cross-sector relative value becomes a more important form of differentiation between investments – and definitely more interesting during a summer of weak supply and low market volatility!