The text opens a discussion around the expectation of financial markets for headline inflation rates to drop significantly towards central bank targets over the next couple of years, maintaining stable inflation expectations in the medium to long term. However, the
As we reach the midpoint of 2023, global markets and economies are clearly moving through a period of transition. What had been a binary environment — a market that was either/or — is now more balanced. Previously,
In Capital Group's report, "Opportunities across the credit spectrum for multi-sector income investors," portfolio manager Damien McCann and fixed income investment director Flavio Carpenzano delve into how the current macroeconomic scenario is creating unique investment opportunities, especially for multi-sector income
The text above explores the market's belief in the normalization of inflation rates in the medium to long term. Markets seem to be downplaying the possibility of a higher-inflation regime caused by structural fiscal policy loosening, a shift in workers'
Capital Group's text centers around a shift in the investment landscape from a low yield environment to one marked by higher expected inflation and more cautious central banks. In this changing financial climate, investors have seen high yields in fixed
Capital Group's "Quarterly Macro and Market Insights" offers a comprehensive perspective on the escalating risk of recession due to emerging signs of economic slowdown. The report explores the implications of this development on US interest rates, advocating for a relative
This research paper presents updated long-term return assumptions for various asset classes in the capital market. The paper highlights the impact of valuations and high starting yields in fixed income on these assumptions, which have been raised across the board
Capital Group’s research, "A multi sector approach for reliable income", presents an intriguing case on the dynamics of bond yields in today's volatile economy. In a climate of mounting inflation and economic ambiguity, higher-yielding bonds offer a promising opportunity for
The piece provides an in-depth analysis of the shifting dynamics in the fixed income landscape. It highlights the dramatic shift from a low-yield environment, influenced by the predictable accommodative nature of central banks, to an era of higher expected inflation
Is the long-term case for emerging market debt still intact? The article discusses the state of emerging market (EM) debt amid current macroeconomic conditions. Key points are the strong fundamentals in major EM countries and the undervalued exchange rates in
In Capital Group's text, the key highlights of Q1 2023 are discussed, focusing on the resilience of Emerging Market (EM) debt despite banking sector volatility. This resilience was driven by investors paying attention to macroeconomic tailwinds from China's reopening, robust
Is the long-term case for emerging market debt still intact? In this research paper, Kirstie Spence discusses the outlook for emerging market debt and how it has been impacted by the global economic backdrop. She emphasizes that despite the current
Mike Gitlin, Capital Group’s head of fixed income, sets out the importance of investing in bond funds that deliver on their stated objective. He also explains what differentiates Capital Group from industry peers. We’ve heard you talk about the four
What the ‘next normal’ means for fixed income: reimagining core bonds That the ‘next normal’ means for fixed income: reimagining core bonds This article explores the “next normal” for fixed income investments in the post-COVID world. After a long period
The recent banking crises in the US and Switzerland have sparked concerns about the stability of the global financial system. However, these crises are unlikely to pose a broader threat. Despite this, lending standards are anticipated to tighten and inflation
In the text "Will the US dollar continue to weaken?" by Capital Group, the main theme revolves around the uncertainty of the US dollar's future and the factors that may influence its direction. The decade-long bull run of the greenback
Growth strategies have long overshadowed dividend strategies. However, changing macroeconomic conditions have turned the tables and dividend investments are enjoying their time in the sun. While this coincides with value’s long-awaited comeback, value and dividend stocks have distinctive characteristics. We
As global businesses seek to diversify their supply chains, they are increasingly adopting the China Plus One strategy. This approach involves investing in countries other than China, with India expected to benefit significantly as it becomes the world's most populous
How Vulnerable is EM Debt to Volatility Spillovers? – Investment Insights This report discusses the recent shocks to the banking system and their impact on emerging market (EM) debt. The report provides insights into two types of EM debt: EM
Investing in Emerging Market Debt: Benefits of an Active Approach Emerging market debt (EMD) is becoming more popular among investors due to its increased liquidity and diversified ownership base. Despite a challenging 2022, active research-based approaches can help identify attractive
After spending over a decade trying to generate inflation, central banks are today confronted with the highest increases in prices since the 1970s. The return of inflation brings with it an unwelcome dilemma; combat inflation or prioritise financial stability. At
Has artificial intelligence (AI) reached a commercial tipping point? The release of ChatGPT, a bot that can produce human-like text, has put AI in the spotlight. ChatGPT has already been used to write short stories, academic papers, jokes, job applications,
Generating income is a key role of fixed income. For investors, the durability of income streams becomes more important amid heightened volatility in both equity and bond markets. The current market environment is characterized by persistent inflation and heightened market
At the beginning of the year, the three major factors driving emerging market (EM) debt were US financial conditions, the dollar and global growth. All three factors look likely to have been changed by the current shock to the banking
In "Sustainable dividends: The pursuit of quality and prudence," Capital Group emphasizes the importance of dividend sustainability, with a focus on historical dividend payments to provide insight into a company's commitment to paying dividends. The article notes that dividend cutters
The recent shocks to the banking system have cast uncertainty over emerging market (EM) debt. However, despite the high number of distressed EM countries, which are usually smaller and carry idiosyncratic risks, major EMs still seem to possess strong fundamentals
The Capital Group's article, "European market outlook Clouds on the horizon," reflects on the impacts of a decade of ultra-loose monetary policy, which led to an aggressive tightening of financial conditions. As a result, the risk of recession has increased,
Key takeaways 60/40 portfolios have certainly seen better times, having recorded their worst-performing year since 2008. A turbulent 2022, however, could be the precursor for a brighter future especially for investors looking to balance long-term growth of capital, conservation of
This is a summary of the “Quarterly macro and market insights” report from Capital Group’s fixed income team. The report indicates that the outlook for bonds remains positive despite concerns about global growth. The global economy is expected to weaken
The full reopening of Japanese borders has been a boon to businesses as the country comes to terms with the hard reality of co-existing with COVID. But with the world grappling with slowing growth and pressing concerns like geopolitical …
Over long periods of time there are two different types of bear markets. There are those that are associated with a recession and those that are not. It is only occasionally that a bear market is associated with a recession.
After nearly three years of zero-COVID policies, the Chinese authorities relaxed most restrictions towards the end of 2022, including “harsh lockdowns, mandatory testing, and centralised quarantine for positive cases and close contacts.” While this relaxation in restrictions has been reportedly
The wisdom of crowds can be powerful. But in times of heightened uncertainty, it can be helpful to understand potential risks. At the moment, markets appear to be crystallising around a hopeful outlook for 2023. Asset prices suggest inflation will
Recessions are painful, no doubt about it. But they are necessary to clean out the excesses of prior growth periods, especially the more or less uninterrupted growth investors have enjoyed over the past decade.
As shown in the following graph, fixed income markets have experienced one of the most, if not the most, turbulent period in history. To put it in perspective, US Treasuries returned -9.1% during the first six months of 20221 ,
Five perspectives on ESG in bond investing: Views from our fixed income team Equity investors are often associated with ESG-related discussions and considerations. Bond investors can also have unique and valuable perspectives on ESG matters. Bond investors have access to
Key takeaways China’s reopening could be a positive catalyst for depressed equity valuations The property market will likely become a smaller part of the economy longer term China’s video game platforms, payment systems and e-commerce have been areas of tremendous
The US Federal Reserve (Fed) downshifted at its February meeting, raising its benchmark interest rate by just 25 basis points (bps), as inflation has begun cooling in the US. This move was widely anticipated by markets, which have begun pricing
There’s a new reality taking shape in global markets. Many commentators are focusing on the rotation from growth to value, but I think that view is too simplistic. Some investors may be hoping for a return to normal after central
As nearly three years of lockdowns come to an end in China, will 2023 be a turning point for equity investors? Without a doubt, China’s equity risk premium is higher than other markets. As investment professionals with more than 25
Last autumn, I thought we were on the verge of a significant recession across the major European economies. I expected real gross domestic product1 (GDP) to contract in the second half of 2022 and then fall in 2023 by 1-2%
Sharp shifts in expectations for central bank policy and the resultant market volatility underscore the challenges facing investors. The third quarter featured a tale of two halves: An initial rally across markets turned into a selloff. Hopes for less restrictive
Key takeaways Global factors weighing on emerging market debt in 2022 look likely to continue in 2023, but high starting yields within EM local currency debt could help offset subsequent price volatility, while negative outcomes appear to be priced in
The global environment led to sharp outflows from EM debt markets in 2022. The rise in US interest rates (and increase in EM inflation), combined with the increase in general risk premium, reduced the relative attractiveness of EM debt …
Quarterly macro and market insights: Markets rebounded in the fourth quarter of 2022, closing a year marked by high volatility as the US Federal Reserve (Fed) reset its monetary policy path. US equities gained, credit spreads tightened and interest rate
Jared Franz, for example, says the Fed will keep rates higher for longer, yet when the economy recovers, it will be stronger than prior rebounds. Meanwhile, Robert Lind argues that European policymakers will likely run looser fiscal policies and tolerate
As the risk of recession looms large over financial markets, how will securitised credit fare? It’s a growing area of bond markets that has become an important anchor of some actively managed, fixed income portfolios. Portfolio manager Xavier Goss discusses
Below are some takeaways by Capital Group’s emerging market sovereign debt analyst Thomas Kontchou on important economic and policy considerations given the leftist candidate Luiz Inácio Lula da Silva’s victory in Brazil’s presidential election. The leftist Workers’ Party candidate Luiz
Mike Gitlin, Capital Group’s head of fixed income, sets out the importance of investing in bond funds that deliver on their stated objective. He also explains what differentiates Capital Group from industry peers. We’ve heard you talk about the four
