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3 Economic Scenarios for 2012
by Russ Koesterich of iShares Blog,
Russ believes that one of three economic scenarios will likely play out next year: the Great Idle will continue, the global economy will slip into a recession or global growth will accelerate. The most likely scenario is that The Great Idle continues. A severe global recession in 2012 is a second possible scenario. In fact, Im placing higher odds on another global recession than I did last year. Theres a tiny chance of a third scenario. In this scenario, emerging markets would resume stellar growth and the developed world would revert back its long-term average growth.
On Tap for 2012: More Bond Market Transparency
by Matt Tucker of iShares Blog,
In 2011, 102 new fixed income funds launched across exchanges in Europe, Canada, Asia and the United States. How will the landscape continue to evolve in 2012? Matt Tucker is here to provide a few insights, including his expectation that new fund launches will help to make the bond market more transparent.
What to Watch for in Early 2012
by Russ Koesterich of iShares Blog,
As 2012 gets underway, investors should pay close attention to two particular unresolved economic issues: High Italian bond yields and the ongoing drama of the payroll tax holiday. These two pieces of unfinished business are likely to dominate headlines and influence markets during the first few months of this year. They both also could send the global economy back into a recession if theyre not solved adequately. What needs to happen for these issues to be resolved? Heres a quick look at some signs investors should watch for.
A Look Back at 2011s Calls
by Russ Koesterich of iShares Blog,
Last December, Russ shared his economic forecast for 2011, along with a series of investment calls. Nearly every Monday since then, he has highlighted certain asset classes and market sectors in his weekly call posts. So, how did his calls perform? Read more to find out.
Following Fixed Incomes 2011 Fund Flows
by Matt Tucker of iShares Blog,
When it comes to fixed income market conditions, 2011 can be described as the year of unmet expectations. In this blog, Matt Tucker explains how that environment influenced fund flows and how investors used fixed income ETFs to respond to ever-changing market conditions.
Where Falling Inflation Means Rising Valuations
by Russ Koesterich of iShares Blog,
Emerging market inflation should decelerate further in 2012 thanks to a combination of continuing slower global growth and the lagged impact of monetary tightening. With the outlook for emerging market inflation improving, my team recently ran an analysis to determine which developing countries are likely to see their valuations benefit the most from falling inflation. Here is the list, with each country ranked in order of how much they should benefit. 1. Brazil 2. India 3. Egypt 4. South Africa 5. Russia 6. Turkey.
Fixed Income in 2011: The Year of Opposites
by Matt Tucker of iShares Blog,
Fears of municipal bond defaults. Expectations of rising interest rates. Those were the conditions fixed income investors were positioned for heading into 2011. Instead, it turned out to be the year of opposites. Matt Tucker looks back at 2011 and studies how market expectations matched up with reality.
Whats Driving Markets These Days? Not Economic Data
by Russ Koesterich of iShares Blog,
Despite generally better-than-expected economic data and a good earnings season, stocks remain stuck in the same trading range theyve been in since the summer. The reason: Political developments continue to trump economic ones. For much of the year investors, including myself, have been surprised and mystified at how political events have unfolded in the United States and Europe. Policy decisions have become harder to predict and are being motivated by domestic political considerations. And increasingly, they are driving how markets perform.
The European Overhang and Odds of a Meltdown
by Russ Koesterich of iShares Blog,
Earlier this week, I noted that very elevated Italian and Spanish bond yields remaina short-term risk for both the European and global economies.Several other major European-related risks also continue to threaten markets.1)In the short-term, a key risk remains European banks. While bank funding needs have been addressed by European leaders, capital adequacy still is an issue. 2)A broader risk remains in the form of the interplay between economic policy and domestic politics. In efforts to solve Europes debt problems, domestic political considerations have too often trumped economics.
Myth vs Reality in the Hunt for Fixed Income Alpha
by Matt Tucker of iShares Blog,
Many investors rely on active managers to oversee their fixed income holdings. The belief is that in opaque markets, information asymmetry exists among investors and a skilled manager can use this asymmetry to outperform the market. Thats the theory. Now, what's the reality? Matt Tucker is here to explain.
4 Portfolio Moves for a Long-Term European Debt Crisis
by Russ Koesterich of iShares Blog,
In recent weeks, governments around the world have stepped up efforts to solve the European debt crisis. While Russ believes European leaders will address the outstanding issues in time to avoid a sovereign debt collapse, here are four investing ideas to consider if you expect the crisis to drag on. 1. Within your international equity exposure, overweight CASSH countries. 2. Within your international equity exposure, overweight emerging markets outside of Europe. 3.) Overweight safe-haven assets. And 4.) Within fixed income, overweight investment grade and munis.
The Cost of (Super Committee) Failure
by Russ Koesterich of iShares Blog,
With the failure of the Congressional super committee, the US economy is now poised to experience a significant slowdown in 2013. Russ explains that given that in 2013 the US economy will very likely still be struggling with the impact of consumer deleveraging and a moribund labor market, the resultant fiscal drag would increase the probability that the United States could tip back into a recession.
The Paradox of Active Fixed Income Management
by Matt Tucker of iShares Blog,
Amid this years volatile markets, many investors expected their fixed income holdings to be a source of stability in their portfolios. But some are finding the opposite has been true. In this blog, Matt Tucker explains how the Paradox of Active Management could be partly to blame.
The Euro-Recession?
by Russ Koesterich of iShares Blog,
Stocks and the euro rose as efforts heated up to help ease Europes debt crisis. Germany and France increased a drive for coercive powers to reject euro zone members budgets that breach EU rules, while a rout of European debt eased on hopes of outside help for Italy and Spain. Despite this progress, a general erosion in confidence coupled with an ongoing deleveraging by the European banks are raising the odds that Europe will experience at least a mild downturn in 2012. For many investors one to two quarters of negative growth now represents the best case scenario for Europe.
Assessing Bank Strength Down Under
by Russ Koesterich of iShares Blog,
Australias strong banking sector is one reason the country is expected to grow faster than larger developed markets. In the 1990s, the Australian government adopted whats called the Four Pillars policy, which prohibits the four big Australian banks from merging or acquiring each other. In this post Russ explains how the countrys Four Pillars policy has helped fuel Aussie banks strength.
3 Reasons Europe is Failing to Act
by Russ Koesterich of iShares Blog,
Its not just US politicians who are failing to adequately address sovereign debt problems. European politicians and policy makers are too. Russ provides three reasons why. 1.Reforms alone arent enough, 2.A lack of firepower and 3.The savior hasnt stepped up. What does this mean for investors? If a politically acceptable solution is not found, Europe risks turning a liquidity problem for smaller peripheral countries into a solvency problem that infects most of the continent. As the European failure to act continues, volatility is likely to remain high in the near term.
The Case for CASSH
by Russ Koesterich of iShares Blog,
Not all developed markets are stuck in a slow-growth environment. Certain smaller developed countries what Russ is calling the CASSH countries appear fundamentally stronger than their larger counterparts. Five countries (Canada, Australia, Singapore, Switzerland and Hong Kong) are likely to hold up much better in the long term than their larger neighbors.
Crafting a Country Call
by Russ Koesterich of iShares Blog,
For nearly a year, Russ has made weekly investment calls about markets across the globe. Heres a quick look at the macroeconomic approach behind his country views and a summary of where his calls now stand. Generally underweight in countries where prevailing macroeconomic conditions cannot explain high or expensive valuations, and he is typically overweight in countries where prevailing macroeconomic conditions cannot explain low or inexpensive valuations.
A Failure to Act
by Russ Koesterich of iShares Blog,
The bipartisan Congressional super committee announced on Monday that it would not be able toreach a deficit-reduction dealin time for its deadline this week. The committees failure will not unleash a near-term economic catastrophe, but it does have four important implications for the US economy: 1. Lower Investor Confidence 2. A Stalled Economy in 2012 3. Fiscal Drag in 2013 and 4. Another Potential Downgrade.
Municipal Debt: Did My Bonds Go Down the Sewer?
by Matt Tucker of iShares Blog,
This month, Jefferson County, Alabama became the largest issuer in the municipal bond market to file for bankruptcy. While the headlines may sound alarming, Matt Tucker explains why this bankruptcy filing does not signal an upcoming wave of municipal bankruptcies or bond defaults. He believes this is a unique situation, one driven more by fraud and poor deal structure than by the economic environment. It is unlikely that there will be any broad impact on the municipal bond market.
Getting Granular with Emerging Markets
by Russ Koesterich of iShares Blog,
Given todays volatile world, it may be time for investors to adopt a more nuanced approach to investing in emerging markets. Rather than using the traditional frameworks such as emerging markets versus developed markets Im advocating that investors consider creating their international allocation on a country or regional basis. Here are two reasons why.
A Risk Lurking in Octobers Retail Sales
by Russ Koesterich of iShares Blog,
October retail sales are the latest sign that the US economy is likely to avoid another recession and is experiencing what Im calling The Great Idle. But a look behind the retail numbers also reveals a major risk facing the US economy. With unemployment still high and wages growing so slowly that hourly workers are losing purchasing power at the fastest rate in 20 years, you may be wondering where consumers are getting the money to buy new cars or the latest iPhone. It turns out that surprisingly brisk retail spending is being supported by lower savings and by help from the government.
Why US Equities Look Expensive, but Japan Does Not
by Russ Koesterich of iShares Blog,
Im downgrading my view of US equities to neutral from overweight. Since I first initiated an overweight on US stocks last December, large cap US equities have outperformed global equities by roughly 5%. The US has recently become marginally more expensive relative to other countries at the same time that its growth prospects have worsened. Im upgrading my view of Japanese stocks to overweight from neutral given Japans low valuations, better growth prospects and stable risk. This is a value call. Japan currently trades at under book value, down from 1.11 times book value 6 months ago.
Tipping into Recession? Not Yet
by Russ Koesterich of iShares Blog,
If you think this is a bad economy, you havent seen anything yet. Thats what the Economic Cycle Research Institute said on Monday when it warned investors that the US economy is tipping into a recession. But heres why Russ does not agree. As ECRI recently pointed out, recessions can begin in periods of positive GDP growth. Im closely watching a big uncertainty looming over the global economy-whether Europe will be able to resolve its crisis. If Greece does end up defaulting on its debt in a disorderly fashion, then the US economy could end up very well tipping into a recession.
Corporate Bonds: Figuring out a Fair Price
by Russ Koesterich of iShares Blog,
Q: How can you determine if corporate bonds are cheap or expensive? A: By looking at the spreads to Treasury bonds, relative to the state of the economy. Why you should care: Corporate bonds look reasonably priced compared with Treasuries. One way to think about corporate bond valuations is to consider thespread. Investors in corporate bonds are assuming credit risk the risk that the issuer wont repay the principal or make good on an interest payment. Investors are arguably not subject to that risk with a Treasury bond (for all its troubles, the US government has never defaulted).
Who Benefits from Eurozone Progress? Hint: Look North, Not South
by Russ Koesterich of iShares Blog,
Many investors are asking this question as speculation increases that policy makers may be moving closer to containing the crisis. While you might assume the answer would be Italy, Spain or Greece, I have a different take. In short, look to the north, not the south: Perhaps somewhat surprisingly, countries in Northern Europe not directly involved in the sovereign debt crisis will likely benefit disproportionately from any credible progress.
Why Moving to Cash May be a Mistake
by Russ Koesterich of iShares Blog,
ecently, weve all had to contend with political inertia that has bordered on dysfunction on both sides of the Atlantic. In times like these, its not surprising that more and more investors are moving into cash. But that move may be a mistake. To be sure, if there is a worsening crisis in Europe or we have another severe recession, investors will probably be better off out of the market for a period of time. But unless you feel confident that you can predict these events, its worth considering three reasons to keep some equity exposure.
Making the (Credit) Grade in Emerging Markets
by Russ Koesterich of iShares Blog,
While emerging markets are not without their share of macroeconomic problems, they are not experiencing the same sovereign debt problems as their developed market neighbors. In fact, the worlds sovereign debt problems are centered in developed markets such as Europe, the United States and Japan. Ive already mentioned this as a fact supporting emerging market equities. Its even more supportive of emerging market fixed income.
The Happiness Dilemma
by Kevin Feldman of iShares Blog,
Princeton professor Angus Deaton studies the impact of the financial crisis on Americans state of mind. The good news? We may be unhappier than we should be. We all know that the financial crisis has been difficult, and I imagine its made most of us unhappy at various times. 60% of American households saw their wealth decline between 2007 and 2009. Deaton wanted to examine more precisely the relationship between the crisis and American happiness-self-reported subjective well-being, or SWB. Which parts of the crisis hit people the hardest?
The US Recoverys Catch-22
by Russ Koesterich of iShares Blog,
With the consumer sector unlikely to fuel a US recovery, that leaves the corporate sector as the engine of growth. At first glance, this would seem to be a safe bet. As I mentioned in early September,the silver lining of todays slow growth environmentcontinues to be the strong financial position of many US companies. But heres the catch: The domestic corporate sector relies on the US consumer. To continue growing over the next few years, companies need consumer spending to pick up. This leads us to the great economic Catch-22 of our time, So, where does that leave the US recovery?
Jobs Plan casts Unexpected Spotlight on Munis
by Matt Tucker of iShares Blog,
Obama's job creation plan included a proposal to cap thetax break for muni interest at 28% for couples earning $250,000+ a year. For an investor in the 35% tax bracket, income from municipal bonds that was tax free would effectively be taxed at 7%. Where does this leave muni bond investors? Vigilance is warranted, but panic is not. Munis are generally viewed as a stable asset that can help investors preserve capital while generating income. I would advise investors to keep an eye on the debate as it progresses and determine how best munis could fit into an overall investment portfolio.
Rewriting the 4% Rule
by Kevin Feldman of iShares Blog,
Is there a safer and simpler way to plan retirement distributions? If youve saved more than you need for retirement and can live on 3% plus an inflation adjustment each year, you have the past century of data on your side suggesting that your nest egg will not outlast you. For most of us though, this is an unrealistic drawdown rate, so you will likely need some professional financial planning help to map out a withdrawal plan that meets your retirement goals. Like all rules that try to simplify complex questions, 4% is just thata number, which may or may not be your number.
Despite Skeptics, Can Gold Continue to Glimmer?
by Russ Koesterich of iShares Blog,
In recent weeks, a number of market watchers and media headlines have declared that the gold bubble is finally bursting and the gold rally is over. I disagree. First, Ive never believed that gold was in a bubble. Second, I believe that prices for the precious metal are likely to remain high for the foreseeable future. As I pointed out in a recent post, Why Gold Prices Are So High, there are three long-term factors supporting gold. 1) The negative real interest rate. 2) Gold tends to do best when fiat currencies depreciate. And 3) Uncertainty over the endgame of the US deficit.
Transfer Payments and the Risk of a Double Dip
by Russ Koesterich of iShares Blog,
In August, US personal income fell for the first time in nearly two years. One reason for the drop: A slowdown in transfer payments. Transfer payments are government payments to individuals and include everything from Social Security to unemployment benefits. This chart a stark illustration of just how dependent disposal income has become on such payments. Thanks to generous growth in transfer payments in the past 50 years, the payments now account for 20% of disposable income. But transfer payments have been slowing in recent months as fiscal stimulus from the federal government wanes.
Fixed Income ETFs and Yield: A Game of Catch Up
by Matt Tucker of iShares Blog,
Whats amazing to me is how many different types of yield existfor a bond or bond fund you could quote the yield a half dozen ways and each would be different. Understanding which yield to use can be confusing. Its easy to be enticed by what looks like the highest, especially in this low rate environment where investors are searching for ways to extract extra income from their bond holdings. I want to highlight three of the most common yields investors see for fixed income ETFs, explain how they are connected and show how they have a tendency to catch up with one another over time.
A Dual View of Operation Twist
by Team of iShares Blog,
On Wednesday, the Federal Reserve outlined its new Operation Twist program. The central bank will buy $400 billion of long-term Treasuries in an effort to lower long-term interest rates and spur lending and economic growth. The announcement came as no surprise: It had been clearly telegraphed by the Fed. Nonetheless, stock markets fell after the announcement and 10-year Treasury yields dropped to levels not seen since the 1940s. Two of our contributors weigh in to explain the markets reaction and the plans implications for equity and fixed income investors.
Jobless Claims, Leading Indicators Could Show US Economy is Not Contracting
by Russ Koesterich of iShares Blog,
Of all the economic reports coming out this week, Im most closely watching for the latest US weekly jobless claim numbers and the new leading indicators data, due out Thursday. Both will give further confirmation on the near-term state of the economy. As Ive mentioned before, I expect that the US economy is most likely going to experience an anemic expansion, rather than another recession. Recent economic reports have so far confirmed my view. I believe the new data this week will similarly show that the while the US economic recovery has stalled, the economy is not contracting.
Dividend Growth Investing: Understanding style and stock selection risks
by Kevin Feldman of iShares Blog,
In my last post on the resurgent popularity of dividend investing, I talked about why the strategy of buying dividend aristocrats has surged in popularity over the past decade. This time Id like to explore the challenges of picking individual stocks and the risk in shunning growth for value. First, remember that not all dividend stocks are created equal. Second, do you really want to be in the stock-picking business?
Latest Data Points to Anemic Expansion, Not a Recession
by Russ Koesterich of iShares Blog,
Some market watchers are interpreting the fact that US consumer confidence remained extremely low last week as a sign that the chances of a sustained recovery have diminished. In my opinion, however, theyre focusing on the wrong numbers among the slew of economic data released Thursday. The right numbers to focus on: new figures from the Federal Reserve that confirm that while economic activity is stalling, we are not yet seeing credible evidence of a double dip.
Whats Missing From Obamas Plan
by Russ Koesterich of iShares Blog,
In a speech last Thursday evening, President Obama outlined his American Jobs Act, a $447 billion package of tax cuts and government spending he hopes will help stimulate the slowing economy. It calls for reduced payroll taxes, extended unemployment benefits and increased spending on infrastructure to help put people back to work. Without passage, I believe the US will suffer significant fiscal drag in 2012 and the economy will face more headwinds. However, while the proposal could spur some growth, it does nothing to fix the longer-term fiscal problems facing the country.
Brazil and Chile | One for Now, One to Watch
by Russ Koesterich of iShares Blog,
Earlier this month, as part of my changed view of emerging markets. I initiated an overweight view of Brazil and noted that I am paying close attention to Chile. As promised, here are more of my thoughts regarding these two emerging market countries.There are a number of reasons why I like Brazil. First, from a valuation standpoint, Brazil looks attractive relative to both its own history and to other MSCI ACWI countries. I am not yet establishing an overweight view of countries in Latin America beyond Brazil, but I am watching Chile closely.
The Transfer Payment Paradox
by Russ Koesterich of iShares Blog,
You dont have to be a fan of profligate government spending to recognize the enormous paradox the United States faces in getting its economic and fiscal houses in order. The US economy is driven largely by consumptionroughly 70% of GDP comes from personal consumption. A large and growing percentage of that consumption is dependent on federal transfer paymentsdirect government payments to individuals. Yet as the US tries to get its deficit under control, these payments could be cut. That in turn could have a significant impact on disposable income and economic growth.
A headwind blows: Septembers seasonal stock weakness
by Russ Koesterich of iShares Blog,
In recent days, a number of market watchers have issued warnings about economic data and events that could roil markets this September. Investors might also want to consider an additional headwind: The seasonal pattern of equity market weakness in September. While most easy-to-find seasonal patterns fall apart when subjected to a bit of scrutiny, this seasonal pattern does appear to be both statistically significant and fundamentally justified. Most academics attribute the September weakness trend to a combination of tax-loss selling and window dressing ahead of the fiscal-year end.
Dividend Growth: Volatile markets revive an old investing strategy
by Kevin Feldman of iShares Blog,
Lately I've been hearing a lot about the new dividend growth strategy: Simply buy the right blue chip stocks featuring rising dividends and youll be on the path to a more secure retirement. With regular headlines like Top 20 High Yielding Dividend Aristocrats and 10 Dividend-Paying Blue Chips for Your Parents, its no wonder Im hearing people at dinner parties buzzing about Coke (KO), J&J (JNJ) and P&G (PG) in a way that reminds me of my grandparents stacking up their stock certificates to keep up with dividend checks from these venerable value giants.
Slow growths silver lining: Corporate Profit Margins
by Russ Koesterich of iShares Blog,
Despite economic weakness, one sector of the economy continues to perform well: Corporations. Today, corporate profit margins are near record highs. But as concerns of a double-dip recession persist, many market watchers are wondering how much longer high profit margins can last. Answers to this question often focus solely on expectations for rising input prices. But I agree with the major conclusion of a new BlackRock Investment Institute paper-profit margin sustainability is more related to overall economic activity than it is to input costs alone.
Ahead of the Numbers: ISM to give an early read on fallout from market volatility
by Russ Koesterich of iShares Blog,
Of all the economic numbers coming out this week theISM is the most important, in my opinion. First, its a good leading indicator of economic activity in general. The reports new order component, in particular, tends to be highly correlated with the next quarters GDP and is the most relevant number for predicting future economic growth. Second, the report is not subject to revisions, meaning what you see in the initial report is what you get. Finally, the report is extremely timely. Its one of the first snapshots well get on how the economy reacted to market volatility in August.
Brazil and Chile | One for Now, One to Watch
by Russ Koesterich of iShares Blog,
Brazil looks attractive relative to both its own history and to other MSCI ACWI countries. The MSCI Brazil index is currently trading at 1.4x book value, versus its average of 2.1x book value over the past five years. In addition, from September 2008 to July 2009, the OECD composite leading indicator for Brazil was lower than it is today; yet the Brazilian market appears cheaper today than it did during that period on average. While Chile is starting to look interesting and we currently hold a neutral view of it, there is no need to rush in.
A Private Matter: Income ETFs
by Kevin Feldman of iShares Blog,
As with all things in investing, theres no free lunch in higher yields; seeking higher returns means taking on higher levels of risk. Depending on your goals, time horizon and view of the macro economy, you may choose to take those risks but its important even given the understandable desire to generate income during a challenging market not to forget that theyre there.
Results 251–300
of 322 found.
