By David O'Malley | November 13, 2017
Tuesday’s release of the Producers Price Index (PPI) and Wednesday’s release of the Consumer Price Index (CPI) will be the economic data highlights this week. With inflation remaining stubbornly low despite strong employment conditions and the odds of a December interest rate increase running around 80%, the importance of the pace of inflation data takes on greater significance.
By David O'Malley | October 30, 2017
This week is a critical week for the bond market as 10-year Treasuries yields are trading above the 2.4% level that has been cited by Bill Gross of Janus as signaling a bear market. This sentiment was reinforced by Jeffrey Gundlach of DoubleLine’s comments when he called this “the moment of truth” for bonds. During the week, several key factors could significantly impact the near term movement of yields.
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.
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.
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.
By David O'Malley | July 24, 2017
Last week, markets traded mainly range bound as economic data and corporate earnings met expectations. In the week ahead, market participants will be closely watching for any clues from the Federal Open Market Committee (FOMC) statement on Wednesday. The Federal Reserve is widely expected to keep interest rates unchanged, but the meeting could provide important information on future policy.
By Scott Ellis | May 25, 2017
It has been a very strong run for the markets since the great recession in 2008/2009. The S&P 500 Index has returned over 200%1 since 12/31/08, and the U.S. High Yield Market is not far behind at over 180% (as measured by the Bank of America Merrill Lynch U.S. High Yield Index). Following such strong runs over the past 8+ years, one has to wonder how much longer this can be sustained.
By Mark Heppenstall | May 18, 2017
The Federal Reserve (Fed) Bank of St. Louis provides investors a weekly gauge of financial stress in the markets with its publication of the St. Louis Fed Financial Stress Index. The Index is constructed using 18 different financial market indicators: seven interest rate series, six yield spreads and five others indicators, including equity and fixed income market volatility. Readings above zero indicate above-average financial stress while values below zero suggest below-average financial stress.
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Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
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High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
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