Current Perspectives

 

Assessing the Risk of a US Economic Recession

The severe equity sell-off has raised concerns of recession in the US economy. Continued market disorder would pose a risk to the expansion at some point, but key indicators today suggest the growth cycle is still on track.

High Yield: Could the 2008 Crisis Repeat Itself?

Does the recent stress in high yield mean we’re headed for another financial crisis? We don’t think so. The probability of anything happening in markets is never zero. But in this case, it’s pretty close.

Six Questions on Emerging-Equity Turmoil

It’s been a terrible start to the year for emerging-market equities. But by maintaining perspective on long-term trends, investors can gain the comfort to stick with developing stocks, in our view.

How Well Do You Know High Yield?

Do these statistics surprise you? While it may initially seem counterintuitive, the high-yield market’s quick rebound rate after downturns actually makes sense. Its consistent, high income makes it among the most resilient asset classes.

Why “Best of Breed” Often Fails

Many investors seek “best of breed managers across each category of stocks. The logic seems compelling: Diversify your risk across categories, while choosing the best performing funds using a framework such as Morningstar’s Style Box. Unfortunately, this approach tends to deliver poor outcomes.

Economic Perspectives

 

Fiscal Policy Change: Lessons from the Reagan Era

US :: President-elect Trump and his team are contemplating the most significant changes in fiscal policy since the Reagan presidency. Proposed changes in taxation, spending and regulation all follow the major fiscal initiatives enacted in the early 1980s. Of course, we don’t yet know which fiscal changes will make it into law—or how successful they’ll be. But we can compare the fiscal initiatives and economic environment of the Reagan era with today’s policy wish list and economic conditions. And this may help assess the economic and investment implications of proposed fiscal change.

Will the ECB Stick or Twist?

Europe :: The case for a reduction in the monthly pace of ECB bond purchases is starting to grow. But with bond markets looking fragile, this would be a dangerous step, in our view. At some point, though, the ECB will need to address the cliff risk associated with the current structure of its asset purchase program and this may involve switching to a more flexible approach.

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