In "Capital Market Line: Quarterly Five-Year Forecast of Relative Risk and Return Across Asset Classes – The Pendulums Are Swinging," the authors discuss a reset of inflationary forces in 2023 and the likelihood of a profit recession rather than an
Credit markets came under pressure again in March, with most fixed income asset classes generating negative total returns, although excess returns were mostly positive. Treasury yields traded sharply higher, and the yield curve flattened, with two- and 10-year Treasury yields
Executive summary Asia has already roiled the world with three waves of economic transformation. A fourth is now building, drawing on past strengths and adding new digital-age capabilities. By 2040 the world could look very different, with Asia representing half
After a long period of disappointing economic outcomes for much of the global populace, the pendulum is swinging toward a new policy mix – and away from the fiscal austerity that often marked the previous cycle. Starting with the Brexit
Interest rate volatility has been the main driver of performance in credit markets over the past couple of months. Heightened inflation expectations drove US Treasury rates sharply higher in March, with 10-year Treasuries reaching levels not seen since January 2020,
Determining whether or not we’re in the midst of a bubble has become topical. In our view, bubbles result when the pool of available liquidity becomes overly concentrated into a narrow space. During the Roaring Twenties, for instance, the Dow ballooned to six times its starting size between 1921 and 1929. On the other side of …
Brightening Outlook Propels Credit Market Rally Fixed Income Asset Allocation Insights Credit markets continued to rally into December, and valuations now fairly reflect optimism that we are firmly on the path toward economic and earnings recovery. While these conditions would
Fixed Income Asset Allocation Insights Credit spreads have mostly remained around fair value, with investors readopting a buy-on-the-dip bias as they weigh conflicting positive and negative fundamental trends. On the positive side, a Biden presidency coupled with the likelihood of
Capital Market Line Quarterly Five-Year Forecast of Relative Risk and Return Across Asset Classes While the spiking number of Covid-19 cases in the US West and South are cause for concern, built-up consumer demand and nascent recoveries in autos, housing
Something Familiar, Something New While the spiking number of Covid-19 cases in the US West and South are cause for concern, built-up consumer demand and nascent recoveries in autos, housing and manufacturing are signs that recovery is still on its
Fixed Income Asset Allocation Insights Rising from incredibly low levels, improving economic data that suggest the imminent start of a recovery drove a sustained rebound in most fixed income asset classes in June. Markets remain highly dependent on the …
Driving optimism in June have been a variety of better-than-anticipated economic reports. Most notably, nonfarm employment rose by 2.5 million, leading to a downtick in the unemployment rate. ISM manufacturing and non-manufacturing surveys each moved up in May. And most
We entered 2020 with expectations of substantially lower, but positive, beta returns following a near-ideal year for asset returns across the xed income spectrum. As the coronavirus took hold and benign economic expectations gave way to severe disruptions, March saw
At the start of this year, last year’s recessionary fears were being forgotten: risk assets had rallied in the fourth quarter, with rosier economic data shining through in January and February. Enter the coronavirus. Amid the turmoil, we kept our
Equity markets experienced the sharpest drop since the global nancial crisis amid shuttered businesses, decimated consumer condence, and unprecedented uncertainties about the outlook. Markets were “disrupted but not derailed,” due to swift actions from governments and the major central banks,
To help buffer their economies from the damage caused by Covid-19, most countries have launched both fiscal and monetary policy thrusts. While driven by common objectives, the optics of these moves – with fiscal authorities issuing massive amounts of debt
Institutional investors relying solely on a core bond or similar all-in-one approach for their fixed income exposure may be missing out on an important investment opportunity set: leveraged finance assets, which include key below-investmentgrade market segments such as high-yield corporate
Bright Signs Amid the Gloom Spreads on high yield bonds and bank loans rallied sharply in April, with index levels 100-200 basis points (bps) tighter compared to quarter-end and nearly 400 bps inside of the mid-March wides. On the negative
The coronavirus panic, falling oil prices and a weaker domestic economy largely inuenced the recent Japanese market correction. However, we believe global and domestic cyclicals are well positioned for the eventual recovery. The current performance of the Japanese markets
Behind the volatility lients have asked us about the difference between the Global Financial Crisis (GFC) and the crisis we face today. During the GFC, control of the recovery was largely in the hands of the government bailing out troubled
Our Key Risk Indicators (KRIs) bridge the gap between sustainability disclosure standards such as those set by the Sustainability Accounting Standards Board (SASB) and quantifiable ESG trends developed specifically with investment analysis in mind. The following is an update of
Given the unprecedented scale of disruption caused by the coronavirus pandemic, which has shut down most segments of the global economy in ways not seen since the Second World War, investment models based on past economic slowdowns or macro theme-based
Capital Market Line We were eagerly awaiting the first quarter of 2020 to demonstrate that 2019 merely marked a slowdown, not the onset of a late-cycle recession. While we’ve been proponents of the global economy’s mid-cycle status, we had acknowledged
The Indian equity market has not been immune to indiscriminate selling due to coronavirus pandemic fears. But while headwinds have picked up for Indian equities in line with global peers, as long-term investors in India, we believe the market continues
Going into 2020, we expected China’s economy to modestly decelerate from the 6.1% pace of growth in 2019, but to cyclically improve as headwinds from the US-China trade war subsided. The coronavirus outbreak presented a signicant exogenous shock to China’s
Markets continue to be dominated by COVID-19. In the early weeks of March, Imperial College’s initial projections of huge numbers of deaths if intensive care units (ICUs) were to overflow coincided with grim news out of Italy, where such scenarios
Capital Market Line Last year proved to be a turning point. Word of an imminent trade deal between the US and China represented a peak in trade escalation and uncertainty. Global manufacturing – the epicenter of the trade war –
As a global organization, PineBridge is focused on the health and safety of our employees and servicing our client portfolios as the coronavirus (COVID-19) pandemic unfolds. We are closely monitoring developments in all regions to follow this evolving situation and
The London Interbank Offered Rate (Libor), the most widely referenced short-term interest rate in the world, is set to be phased out after 2021 owing to concerns about its subjectivity. Given the magnitude of financial contracts tied to US Libor,
Leveraged Finance Asset Allocation Insights Spreads on high yield bonds, bank loans, and CLO debt tranches continued to tighten throughout the first few weeks of January amid a backdrop of consistently positive macroeconomic data, a signed Phase One US-China trade agreement,
Capital Market Line Last year proved to be a turning point. Word of an imminent trade deal between the US and China represented a peak in trade escalation and uncertainty. Global manufacturing – the epicenter of the trade war – began to
In a post-crisis economy characterized by insufficient demand and a liquidity trap, few would have prescribed a policy mix of torrential monetary accommodation teamed with tight fiscal spending. Yet that’s precisely what we got, spawning economic frustration and populism. Politicians
As the United States moved closer to a phase-one trade deal with China and investors looked past the quarter’s earnings trough into 2020’s expected rebound, the rally in high yield and loan spreads continued, and even accelerated. Notably, lower quality
Last quarter’s return of extremely accommodating monetary policies and the renewal of US-China trade talks were the two most signicant developments affecting our ve-year outlook as expressed in our Capital Market Line (CML). Since our CML focuses on how events
A large and liquid domestic equity market in China is shaping up to be one of the world’s biggest investable universes. To capture the generational opportunity of China A-shares, international investors need to navigate a unique environment that’s a source
While bank-loan total returns continue to trail those of high yield by a significant margin year to date, the asset class outperformed high-yield bonds in November amid a backdrop of higher Treasury rates and slowing retail outflows. Less susceptible to
In 2020, we see three forces in the global outlook: the macro, monetary policy, and political cycles. While the macro cycle is typically the dominant market influence, in 2020, we see monetary policy wielding the most sway. The political cycle
The end of this expansion’s third mini-slowdown and rebound in global PMI’s should lead to a greater rebound in cash flows than in GDP, like the prior two mini-slowdowns. A plateauing of trade hostilities, instead of outright reversals, is enough
Private Funds Outlook Amid the current environment of slowing growth, below-target inflation and ultra-low interest rates, highly levered financial engineering is likely to remain in vogue in 2020. In spite of these conditions, doors may open to smaller, mid-market transactions
The extended length of the current economic cycle obscures the many mini-cycles in industrial and consumer sectors – early identification of these periods can provide the potential for meaningful alpha opportunities. Companies that embrace digitalization, data capture and the use
Fixed Income Asset Allocation Insights With credit spreads now largely in a fair valuation range, our current allocations remain unchanged. After cutting the federal funds rate by the anticipated 25 basis points (bps) and lowering the target range to 1.5%-1.75%,
It’s not likely the conditions of 2019 will be repeated, where safehaven government bonds as well as higher risk fixed income assets performed well. We expect 2020 to be marked by a continuation of bifurcated risk appetites, in which many
In the booming 1990s, it was fashionable to view every glass as half full. That didn’t end well. Today, gloom-meisters see problems under every rock. This approach isn’t paying dividends either, as one the longest and strongest bull markets ever
Leveraged Finance Asset Allocation Insights High-yield (HY) spreads were modestly wider in October, however, coupon income more than offset declines in prices and the asset class was able to generate positive total returns. Loan spreads and discount margins on collateralized
30 October 2019 Today’s rate cut to 1.75% by the Federal Open Market Committee has been a foregone conclusion. A still-uncertain global environment mixed in with sluggish readings from ination indicators and the manufacturing sector seemed enough for another “midcycle
Political upheavals, economic deterioration, and commodity-price turmoil. Investors used to perceive these idiosyncratic risks as a hallmark of investing in emerging markets (EM) debt. But emerging markets have come a long way since then. In aggregate, these countries are now
Last quarter’s return of extremely accommodating monetary policies and the renewal of US-China trade talks were the two most significant developments affecting our five-year outlook as expressed in our Capital Market Line (CML). Since our CML focuses on how events
Last quarter’s return of extremely accommodating monetary policies and the renewal of US-China trade talks were the two most significant developments affecting our five-year outlook as expressed in our Capital Market Line (CML). Since our CML focuses on how events
Chinese businesses are not just changing China, they are changing the world. This bespoke study dives into the dynamics that have led to the rise of new corporate giants, while at the same time uncovering trends, firms and drivers that
Should fixed income investors hedge currency exposure in their portfolios? That is the question – and the simple answer is “yes.” Yet, for investors looking to take currency exposure to generate additional return or to avoid hedging costs, we have
