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July 2019 Fixed Income Market Update
Shifting expectations around monetary policy globally and trade tensions dominated market news in June.The tariffs that President Trump announced on all imports from Mexico at the end of May were scuttled before implementation as Mexico agreed to institute more stringent border security.
I am the Walrus…Goo Goo Ga Joob
How did we get to the 10-year Treasury yield closing in on 2.0%, well below the Federal Reserve (Fed) target of 2.25-2.50%? It’s a fair question that has no clear answer. Let’s face it; relatively speaking, it’s all been a bit surrealistic and tough to digest. But our mystery tour set off late last year on equity weakness as the S&P 500® Index fell 13.5% over the fourth quarter.
Country Visits: Chile, Peru and Mexico
Country visits: Chile, Peru and Mexico Chile is a country that punches above its weight as a nation. After lagging behind its Latin American peers in terms of GDP per capita in the 1980s, today Chile is the wealthiest nation on the continent and the leader in the region from a human capital perspective.
A Global Economy Far From “Normal”
Election fever hit India and Australia in May. The former, the largest democratic election in the world, resulted in a comfortable win for the incumbent – Narendra Modi and his Hindu Nationalist Party (Bharatiya Janata Party). Mr. Modi comes from a humble background and this appears to have resonated with millions of voters aspiring to a similar uplift in fortunes.
June 2019 Fixed Income Market Update
The market sentiment decline in May was largely driven by the ongoing trade dispute between the U.S. and China. After expectations of a near term resolution had buoyed markets in April, these hopes faded in May.
Preaching Patience with Risk Assets
Markets just got a wake-up call on trade that interrupted their pleasant dreams of recovery from late last year. Aggressive U.S.-China negotiations have now escalated to an outright trade war, with significant tariff levies on both sides, and more threatened. Reports of Chinese flexibility on technology transfer and intellectual property violations have given way to accusations of U.S. “blackmail,” vows to never give ground on China’s “core interests,” and greater importance placed on bilateral deals with Europe.
Pension Lump Sums: Thoughtful Considerations for Plan Sponsors and Retirees
The IRS recently altered course and announced that it will no longer stop employers from offering retirees a lump sum payment in exchange for their pensions. Initial reactions have been that this is very bad — comparing lump sum cash-outs to cigarettes — legal, liked and bad for you.
Modern Monetary Madness
The IMF commented that its global growth outlook “reflects a combination of waning cyclical forces and a return to tepid potential growth in advanced economies; a precarious recovery in emerging market and developing economies, driven to a great extent by economies currently experiencing severe macroeconomic distress; and complex factors that shape the prospects for potential growth in both groups… the possibility of further downside revisions is high, and the balance of risks remains skewed to the downside.” We have heard that language before.
May 2019 Fixed Income Market Update
The International Monetary Fund (IMF) lowered its global growth outlook for 2019 to 3.3% from 3.5%, while noting it believed “the balance of risks remains skewed to the downside.” For 2020 though, the IMF expects an improvement of growth to 3.6%. Euro-area GDP grew more than expected in the first quarter at 0.4% and 1.2% for the trailing year. Unemployment in the Eurozone declined 0.1% to 7.7% in February. However, other data such as manufacturing PMI declined to 51.3 in April from 51.6 in March.
Vietnam: The Emerging China?
It’s very hard to visit Vietnam and not get excited about the opportunity. Looking at the country today, there are many similarities with China 15 years ago. Indeed, the rate of development in Vietnam since it opened up to the world in 1990 is almost identical to the first 18 years of China’s growth post 1977. But the similarities go well beyond the growth rates.