U.S. Bond Yields: Searching for Normal
Adrian Hilton, Head of Global Rates and Currency, considers how in spite of the recent rise in U.S. bond yields, they remain low by historical standards. Will bond yields ever readjust to their normal historical cycle?
Outlook for the U.S. Economy and Monetary Policy*
Newly sworn in Vice Chairman of the U.S. Federal Reserve Board, Richard H. Clarida delivered a speech in which he shares his thinking on the current state of the U.S. economy and his views on the way forward for U.S. monetary policy.
Additional reading: Measuring the Natural Rate of Interest*.
The Laubach-Williams and Holston-Laubach-Williams models provide estimates of the natural rate of interest, or r-star, and related variables. Their approach defines r-star as the real short-term interest rate expected to prevail when an economy is at full strength and inflation is stable.
Diversification: What Next? / Growth vs Trade: The Battle Continues
Joshua Kutin, Head of Asset Allocation, North America and Anwiti Bahuguna, Head of Multi Asset Strategy, provide their views on the historically narrow market that we have seen in 2018, and on the prospects for growth as tariff rhetoric continues to escalate.
Additional reading: Our view on U.S. Equities
Joshua Kutin, Head of Asset Allocation, North America, discusses the relative appeal of U.S. equities within an overall equity allocation.
Global Quant Equity Briefing: Q3 2018
Our Quantitative Research team provides a detailed analysis of market drivers for the third quarter, which saw higher oil prices, higher U.S. Treasury yields and higher U.S. equity markets.
Securitized Fixed Income: A Decade After the Financial Crisis
Jason Callan, Senior Portfolio Manager, Head of Structured Assets, discusses the current state of the securitized bond market. In addition to new regulation, the strength of the economy has provided support for the asset class, while still allowing opportunities for active research and management to add value.
Housing: Re-Adjustment or Cause for Concern?
Anwiti Bahuguna, Head of Multi-Asset Strategy, considers whether the recent slowing of some of the housing market data is the end of the post-crisis housing boom, or just a temporary slowdown within the larger housing growth cycle.
Finding Relative Value in Bonds
For asset allocators, it is not only important to make the correct asset class decisions, but also to allocate efficiently within those asset classes. Joshua Kutin, Head of Asset Allocation, North America, looks at fixed income and the various decisions his team confronts when investing in the asset class.
Is There Value in Value Investing?
The cyclical relationship between growth and value has overwhelmingly favored growth on a cumulative basis for several years. Our Quantitative Research team analyzes the reasons for this and how much longer the investing environment can support growth factor investing.
Additional reading: Factset S&P 500 Earnings Season Update: August 13, 2018 *
As of August 13, 2018, 91% of the companies in the S&P 500 have reported actual results for Q2 2018. 79% of these companies have reported actual EPS above the mean EPS estimate, which is the highest percentage since FactSet began tracking this data in Q3 2008. Source: FactSet * financial data and analytics.
Turkey and the Prospect of Emerging Markets Contagion
The Global Asset Allocation team examines the current environment in Turkey and considers the prospect of financial risk spreading to other markets.
Asia Mid-Year Update: Markets Meet Tariffs
After having run on a platform of protecting America’s trade interests, President Donald Trump and his administration enacted new trade tariffs directed at China and have threatened even more. The biggest news from the region, however, may have been President Trump’s meeting with Kim Jong-un. Soo Nam Ng, Global Head of Asia Equities, assesses the shifting dynamics in Asia and the impact they will have on investors.
(Don't Fear) The Yield Curve *
Eric Engstrom and Steven Sharpe at the Federal Reserve note that the “near-term forward spread” in the yield curve may be a stronger predictor of recession than the more commonly referenced long-term spread.
Engstrom, Eric, and Steve Sharpe (2018). “(Don't Fear) The Yield Curve,” FEDS Notes. Washington: Board of Governors of the Federal Reserve System, June 28, 2018, https://doi.org/10.17016/2380-7172.2212.
Global Quant Equity Briefing: Q2 2018
Our Quantitative Research team provides a detailed analysis of market drivers for the second quarter.
Investment Strategy Outlook Q3 2018
Josh Kutin and Anwiti Bahuguna of the Columbia Global Asset Allocation Team present their views on current market conditions and their outlook for asset classes as we begin the second half of the year.
5-Year Capital Market Assumptions
The Global Asset Allocation Team conducts its semi-annual assessment of capital markets and forecasted returns.
Fixed Income Quarterly Review
The Fed raised rates once during the quarter and 10-year U.S. Treasury bond yields cleared 3% in sustained fashion for the first time since 2011, only to fall below that level as the quarter ended. Our Fixed Income team assesses the significance of these and more in its quarterly overview of the fixed income market.
Strong Earnings Boost U.S. Equities Outlook
Toby Nangle, Global Head of Asset Allocation, and Maya Bhandari, Portfolio Manager, review how the unexpectedly strong earnings season has impacted the outlook for U.S. markets.
Hedging Interest Rate Risk With Floating Rate Loans
With the Federal Reserve on a clear path to higher interest rates, investors may look for ways to hedge against rising interest rate risk. Floating rate loans, which offer an adjustable coupon reset, may be an attractive option in this environment.
The UN SDGs: A Touchstone For Today's Responsible Investor
Rose Beale, Thematic Analyst, Responsible Investment, and Gareth Davies, Head of Responsible Investment Solutions consider the UN Sustainable Development Goals as a potential guide for investing towards a more sustainable world.
Wage Inflation and Informal Work*
Researchers at the Federal Reserve Bank of Boston examine one possible explanation for the lack of wage inflation: The labor market is not as tight as the unemployment rate indicates. Specifically, they investigate the possibility that informal “gig” work embodies an economically significant amount of labor market slack that is not captured in the U-3 unemployment rate and other standard estimates of slack.
The Wage Inflation Enigma
Mark Burgess, Deputy Global CIO & CIO, EMEA, examines how, after ten years of extraordinary monetary stimulus, inflation remains stubbornly low on a global basis.
Rising Bond Yields Point to Higher Commodity Prices
David Donora, Head of Commodities, points out how higher yields may help to strengthen already favorable supply-side constraints.
Emerging Markets: Q1 Review and Outlook
Dara White, Global Head of Emerging Markets Equity, reviews the environment for emerging markets in light of the U.S.-China trade dispute and other macro issues.
Global Quant Equity Briefing: Q1 2018
Our Quantitative Research team provides a detailed analysis of market drivers for the first quarter.
Fixed Income Quarterly Review
Our Fixed Income team provides its quarterly review of the fixed income market.
Asian Bonds: Windows of Opportunity
Clifford Lau, Head of Fixed Income, Asia-Pacific, explains why Asia’s inefficient fixed income markets may offer opportunities for flexible investors.
5-Year Capital Market Assumptions
The Global Asset Allocation Team conducts its semi-annual review of capital markets and forecasted returns.
Inflation and Market Valuations
Colin Moore, Global Chief Investment Officer, considers the impact renewed inflation expectations have on fixed income and equity market valuations.
Corporate Governance in Japan - Progress and Pragmatism
Michael Hamblett, Analyst, Responsible Investment, looks at the continuing corporate governance reform in Japan and the progress that has been made in how Japanese companies are managed.
Commodities and ESG
David Donora, Head of Commodities, examines the challenges posed by responsible investing in commodities.
Emerging Market Equities Look Strong After 2017 Rally
In an interview with Pensions and Investments, Dara White, CFA, Global Head of Emerging Markets Equity, discusses his 2018 outlook for the asset class, where he sees opportunity, and how he finds worthy emerging markets investments.
Additional reading: Emerging Markets: Valuations Are Still Attractive
The MSCI Emerging Markets Index gained 37.5% in 2017, but emerging markets still have a relative valuation advantage over developed markets on a forward price to earnings ratio basis.
Fixed Income Quarterly Review
Our Fixed Income team provides its quarterly review of the U.S. fixed income market.
Latin America 2018: Balancing Short-Term Political Uncertainty and Ongoing Economic Recovery
Ilan Furman, Portfolio Manager, Global Emerging Markets Equities, looks at the current state of the Latin American equity markets and sees the possibility of long-term improvement beyond any short-term uncertainty.
Emerging Markets 2018
Dara White, CFA, Global Head of Emerging Markets Equity, sees a clear path for emerging markets’ continued good performance, as perennial caveats, dollar strength and China weakness, stay largely in check. Earnings is the key driver going forward.
Additional Reading: Emerging Markets: Outperforming the World
The MSCI Emerging Markets Index gained 37.5% in 2017, outperforming the MSCI World Index (developed markets), which rose 23.1% during the same period.
Japan: More Tailwinds than Headwinds for 2018
Daisuke Nomoto, CMA (SAAJ), Head of Japanese Equities and Senior Portfolio Manager, concludes that Japan’s equity market, supported by the inflationary goals of the current government, reasonable valuations and favorable economic backdrop, can continue its upward trend.
A Synchronized Upswing in Global Growth
Mark Burgess, Deputy Global CIO and CIO, EMEA, discusses the current period of synchronized global growth and the macro-economic and geo-political events that could influence performance in 2018.
Fixed Income 2018: Facing Facts
Colin Lundgren, Global Head of Fixed Income, looks at the success fixed income markets have had over the last two years and questions whether the environment can support a third successive year of good performance.
Four Questions for Edward Al-Hussainy
Ed Al-Hussainy, Senior Interest Rate and Currency Analyst, gives his perspective on monetary policy in a low inflation environment, the new Fed chair, balance sheet unwinding and tax cuts.
Commodities Hitch a Ride on Global Growth
David Donora, Head of Commodities, discusses the factors that may increase demand for commodities in 2018 including stronger economic growth in developed and developing markets, a weak U.S. dollar and further fiscal stimulus.
Quantifying the Effect of the Bank of Japan's Equity Purchases*
Toby Nangle, Head of Global Asset Allocation and Anthony Yates, Former Professor of Economics, Birmingham University; former Senior Advisor, Bank of England, evaluate the quantitative easing program of the Bank of Japan, which stands out for its size and scope.
New IRS Pension Plan Mortality Table
Thomas Egan Jr., FSA, EA, CFP; Actuary, Liability Driven Investments, examines the impact the new IRS mortality table has on plan liability for minimum funding, lump sum pension payments and PBGC variable premiums for underfunded plans.
Japan: A Positive Outlook Takes Hold
Daisuke Nomoto, CMA (SAAJ), Head of Japanese Equities, Senior Portfolio Manager, assesses the current state of the Japan equity market and concludes that some long-sought economic goals and reforms are finally taking hold.
Asia's "Great Moderation" Holds Promise for Equities
Soo Nam Ng, Head of Asian Equities, compares the relative low level of volatility in the U.S. to the current environment in China and sees the shift in emphasis from fast growth to sustainable growth as beneficial to the long-term equity market prospects in the country.
What The Fed's Balance Sheet Runoff Means For Bonds
Gene R. Tannuzzo, CFA, Senior Portfolio Manager, reviews the proposed framework for the Fed's balance sheet unwinding program and its possible implications for fixed income markets.
Update: Capital Market Assumptions
The Global Asset Allocation Team performs its semi-annual review of market expectations. This helps the team set strategic asset allocations and design portfolios with diverse investment goals. Maintaining long-term forecasts provides helpful context for responding thoughtfully to daily swings in market prices.
New York University Professor, Menachem Brenner, who pioneered the VIX index, is currently working on a measurement for "ambiguity", or uncertainty, as distinct from risk, in an attempt to explain why markets are demonstrating historically low volatility readings. Read his interview with the Nikkei Asian Review.
The Long Unwinding Road of Quantitative Easing
Mark Burgess, Deputy Global Chief Investment Officer, assesses the next phase of global monetary tightening. The U.S. Federal Reserve has raised rates several times since December 2015 and has signaled the beginning of the end of QE. Will other central banks follow?
New Accounting Standard May Accelerate U.S. Pension De-Risking
Thomas Egan Jr., FSA, EA, CFP, Actuary, discusses how the latest change to FASB rules should encourage plans to move toward de-risking strategies. With less emphasis on Expected Return on Pension Assets, the objection to Liability Driven Investing, as well as a larger allocation to fixed income in general, has been removed.
Emerging Markets Spotlight — India and Argentina
Natasha Ebtehadj, Portfolio Manager, Asian Equities, looks at Prime Minister Narendra Modi's reform program and suggests that efforts to modernize the financial system will have lasting benefits for the country.
Additional Reading: Argentina: The "Emerging" Emerging Market
Ilan Furman, Portfolio Manager, Global Emerging Markets, discusses Argentina’s efforts to reform its economic health and what its reinstatement to the MSCI Emerging Markets index will mean in symbolic and practical terms.
What Will End The Search For Yield?
This paper assesses the impact that yield-driven fixed income investing has had on the market and the drivers of the search for yield.
Hedging Interest Rate Risk With Floating Rate Loans
With the Federal Reserve having changed its tack from accommodative to one of normalization, investors will look for ways to hedge against rising interest rate risk. With their adjustable coupon, floating rate loans have the potential to hedge risk in a rising rate environment.
Alternative Beta Primer
Bill Landes, PhD., Head of Global Investment Solutions, examines the use of alternative betas as a strategy for increasing portfolio diversification and improving risk-adjusted returns. Alternative betas have minimal market directionality, and are less correlated with traditional markets, making them good portfolio diversification tools.
Asian Bond Markets Versus the Federal Reserve Bank
In sharp contrast to 2013, when the suggestion of higher rates by the Fed was enough to disrupt emerging currency markets and convince investors to significantly reallocate out of emerging markets, Asian bond markets have shown resilience in response to rising U.S. interest rates and the new administration, as several of the region’s central banks continue to reflate in order to maintain a trend of stronger economic growth.
Additional reading: Emerging Markets' Cloud Receding
Krishan Selva, CFA, Client Portfolio Manager, Global Emerging Markets, discusses the improving outlook for emerging markets equities as the new U.S. administration softens its rhetoric and adopts a more pragmatic approach.
The Makings of a Commodity Bull Market
David Donora, Head of Commodities, notes that events in early 2017 have supported stronger performance from commodities, and that elements may be in place for a bull market in the asset class. Stronger economic growth in both developed and developing markets is increasing demand at a time when supply is constrained.
Technology is Bringing Responsible Investment Into the Mainstream
Iain Richards, Head of Responsible Investment, EMEA, discusses how new technologies are helping to seamlessly integrate ESG factors into the portfolio research process.
Long March to Higher Interest Rates
We've entered a new global economic environment, where fiscal policy supplants monetary policy as an engine of economic growth. China will be watched as it shifts from an export production orientation economy to a domestic consumption oriented one.
Natasha Ebtehadj, Portfolio Manager, Asian Equities takes a look at Asian markets and their ability to withstand any potential changes to global trade dynamics that may result from the policies of the new American administration. She believes that, while not immune, Asian economies possess enough diversity to provide investment opportunities should significant changes be enacted.
Why Non-U.S. Institutional Investors are Investing in U.S. Municipal Bonds
The Municipal Bond Investment Team looks at the reasons that U.S. municipal bonds, historically favored by taxable U.S. investors, have attracted increasingly more interest from non-U.S. institutional investors.
So Long, Bond Bull Market
We've entered a new era for fixed income, as central banks shift their attention from monitoring deflation risks to balancing the need for economic growth while keeping inflation in check.
Additional reading: Currencies Face an Uncertain 2017
As a new U.S. administration begins and the U.K. prepares to leave the European Union, Matthew Cobon, Head of Government and FX examines the landscape for currencies in 2017.
Emerging Markets in the Wake of the U.S. Election
Dara White, Anwiti Bahuguna, and Edward Kerschner provide insight into emerging markets and the effect the Trump administration may have on emerging markets.
Toby Nangle, Head of Global Asset Allocation, examines the collision of globalization and the growing strength of political populism we have witnessed over the last year.
Mortality Improvements: Less Costly for Pension Plans
Thomas Egan, Actuary, Liability Driven Investments, evaluates the potential for positive improvements on pensions’ funding status based on new mortality data recently released by the Society of Actuaries.
Negative Interest Rate Policies
Maya Bhandari of Columbia Threadneedle Investments examines central bank policies and their efforts to stimulate their countries’ economies through the implementation of negative interest rate policies.