Current Perspectives


Counting on Cash in Cloudy Equity Markets

Equity markets are digesting mixed signals in early 2015, from the divergence of monetary policies, shifting economic growth patterns and currency volatility. Instead of worrying about deciphering these trends, we think investors should focus on individual company cash flows in order to identify companies with strong long-term return potential.

Afraid of Rising Rates? Don’t Be.

Sometime this year, the Federal Reserve will probably raise interest rates for the first time in more than half a decade. That makes bond investors nervous. But it shouldn’t. Those who keep their cool may find that higher rates can work to their advantage.

Is Greece Nearing the End of the Road?

Greece and its euro-area partners have yet to reach a deal to secure long-delayed bailout funds. Without these funds, Greece could run out of money in a matter of weeks, raising the real prospect of a default on payments due to its official creditors.

Economic Perspectives


Hostage to Fortune: US Wealth Cycles & Monetary Policy Shifts

US :: Over the past 20 years, the ratio of household net worth to income has been on a volatile ride—rising to historical highs only to drop back sharply and swiftly to postwar norms. In our view, this volatile ride is closely tied to a fundamental shift in the implementation of monetary policy and a change in the measurement of inflation. Unless there is a reset of policy or the inflation measurement, this volatile ride will continue.

Is the ecb Sending the wrong Signals on spending?

Europe :: The euro area’s budget deficit continues to narrow, but not quickly enough to prevent its debt ratio from rising. Stronger growth and ultra-low financing costs point to a lower deficit again this year. But after years of hardship, governments may be tempted to spend any fiscal dividend—especially with the ECB short-circuiting the discipline normally provided by bond markets.

Asia’s Export Cycle: Recovery Or Relapse?

Asia :: With January and February data distorted by the Lunar New Year, anxious investors hoped that March figures would underscore a recovery in Asia’s exports. But when the smoke cleared, the picture wasn’t pretty. The odds are stacked against a swift recovery in the near future owing to a dearth of demand outside the US and of growth drivers apart from some technology products.


Japan :: Wage growth is fast becoming the key metric used by central banks to judge both the “true” slack in the labor market and inflation expectations. Japan is no exception, and the positive outcome in this year’s “Shunto” negotiations is a central reason why the Bank of Japan is in no hurry to accelerate monetary easing.

Brazil: Petrobras Comes Clean

Latin America :: Petrobras avoided a possible technical default this week by releasing its audited financial results for 2014. The announcement reduces uncertainty about the company and the Brazilian economy at large, and should be good news for Brazilian assets.

Global Economic Outlook

Global :: Our global growth forecast remains steady at 3% for 2015, following an estimated 2.7% gain in 2014. But the modest acceleration in global growth masks significant changes in the growth paths of the developed and developing economies. Growth in the industrialized economies is expected to accelerate by anywhere from about 1% to 2.6% this year, while growth in the developing economies is projected to slow to 3.7%, significantly below trend and last year’s estimated growth rate of 4.4%.

In the News


Liquidity risk is manageable and can offer opportunities: AB

Liquidity risk—or the danger that investors will be unable to trade in securities at the time and price of their choosing—has become a much greater challenge for investors, and could hurt bond investors in particular as interest rates rise.